According to the Monetary Authority of Singapore (MAS), Singapore’s economy is expected to gradually improve in the second half of 2024, with growth becoming more evenly distributed across sectors, barring any new global economic shocks. MAS indicates that for the year as a whole, Singapore’s growth is anticipated to approach its potential rate, although the output gap will remain slightly negative.

Singapore’s trend growth is typically estimated between 2% and 3%. However, global economic growth is expected to decelerate, primarily due to tight monetary policies impacting the G3 economies—Eurozone, Japan, and the United States. G3 growth is projected to fall from 2.3% in 2022 to 1.7% in 2023, further decreasing to 0.7% in 2024. While China’s economy shows signs of recovery, it remains hindered by a struggling property sector and local government fiscal constraints.

For 2023, Singapore’s gross domestic product (GDP) growth is predicted to land within the lower half of the official forecast range of 0.5% to 1.5%. MAS notes that the anticipated growth in 2024 comes with uncertainties regarding its strength and sustainability, heavily dependent on external demand.

As the economy has been operating on a “three-speed trajectory”—with weak growth in external industries, above-trend growth in domestic sectors, and robust growth in travel-related industries due to the reopening of borders—MAS expects sectoral growth rates to converge towards pre-COVID trends in the coming quarters.

The global electronics industry is beginning to show improvement, though challenges persist. The decline in global chip sales is stabilizing, primarily driven by fabless firms linked to generative AI. However, memory and logic chipmakers continue to face difficulties. Demand for IT products remains subdued in Singapore’s main markets, China and the US.

MAS anticipates that Singapore’s electronics sector will not see significant recovery until the latter half of 2024, as structural demands grow due to advancements in generative AI, electric vehicles, and 5G technology. Nevertheless, external pressures from the US-China tech rivalry could impact local players, adding to the uncertainty.

In the financial services sector, growth appears to have bottomed out as interest rates stabilize, suggesting a potential modest recovery. However, growth momentum in travel-related industries is expected to decline as supply and demand balance out. Additionally, the growth of domestic-oriented sectors, such as food and beverage and retail, is likely to normalize as the post-reopening momentum diminishes.

Economists predict that manufacturing growth will likely outpace services growth by the second quarter of 2024 as global electronics demand rebounds, while spending in services may decrease. Despite a predicted softening in the labor market over the coming quarters, overall employment growth should remain buoyed by domestic services and travel-related sectors, with labor demand in external industries anticipated to recover later in the year.

However, wage growth may decelerate, with MAS projecting that resident nominal average monthly earnings growth will decline significantly as nominal GDP growth slows and bonus payments normalize. Observations from economists suggest that the last two years have been unusual regarding inflation, affecting wage expectations. Although MAS anticipates a reduction in wage growth, some economists believe that tight labor market conditions could support ongoing wage increases in certain sectors.