2024 Outlook & Strategy - DBS Research 2024-01-04: Outperforming In A Slow-Growth Environment

• The global soft-landing has set up a stable backdrop for Singapore’s small open economy. While global GDP is set to moderate due to declining growth in the US, a recession will likely be avoided. A stable contribution from China is equally important, with a soft rebound and GDP growth of +4.5% expected in 2024.

Global soft-landing a stable backdrop for Singapore

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• The strength of ASEAN growth in 2024 is another key source of support to Singapore. As Singapore’s largest trading partner, we expect a positive spill-over effect on Singapore’s exports and/or demand from the 50bps pick-up in the annual real GDP growth of ASEAN-5 economies. This will be driven by the electronics export cycle bottoming and continued recovery in travel and tourism; both sectors being key to Singapore’s growth and recovery.

More balanced growth for Singapore

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• the gradual recovery of external demand and global electronics industry.
• Firms within the transport engineering cluster have the most optimistic outlook for the next six months, with more aircraft engine repair jobs in aerospace (ST Engineering (SGX:S63), SIA Engineering (SGX:S59)) and higher level of shipyard activities in marine and offshore segments (Seatrium (SGX:S51)). Electronics PMI returned to expansion (50.1) in Nov 23, affirming a recovery for the technology sector, corroborating the improvements in business sentiments over the past two quarters (Q323: +23 vs Q1/Q2: +7/+11).
• The services sector has held the fort over the past year on reopening tailwinds. We expect this situation to continue amid the anticipated Chinese tourists influx into Singapore-Malaysia-Thailand with the waiver of visa requirements for short-term visits. Albeit positive, a repeat of double-digit growth in the travel-related services is less likely as international visitor arrivals head towards the final leg of complete recovery in 2024.
• Conversely, the wholesale trade and finance & insurance sectors should recover after signs of bottoming out from 3Q23. The expectation for a pickup in financial activities should spell for strong non-interest income (NII) growth for banks, which would help alleviate the impact of stabilising/declining net interest income.

FDI inflow

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Kee Yan YEO DBS Group Research | Fang Boon FOO DBS Research | https://www.dbs.com/insightsdirect/ 2024-01-04 SGinvestors.io

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