A recent quarterly survey conducted by the Monetary Authority of Singapore (MAS) indicates that private-sector economists have upheld their growth forecast for Singapore at 2.4% for 2024. However, there is a notable shift in expectations regarding the manufacturing sector, which is now anticipated to contribute less significantly to the economy.

The forecast for manufacturing growth has been downgraded to 1.6%, down from 4% in the previous survey. This change reflects disappointing industrial production data observed in early 2024, according to UOB’s senior economist Alvin Liew and DBS economist Chua Han Teng.

In terms of inflation, the median forecast for headline inflation has been adjusted downwards to 2.8% from 3.1%, while the core inflation estimate remains steady at 3%. These figures align with official government forecasts, which project GDP growth between 1% and 3% for the year and inflation rates ranging from 2.5% to 3.5%.

While expectations for manufacturing have declined, forecasts for three out of five major sectors have seen an increase. The finance sector is expected to drive economic growth, bolstered by an anticipated rise in credit demand due to easing global interest rates. Growth projections have also improved for wholesale and retail trade, alongside accommodation and food services.

Conversely, construction and manufacturing sectors are viewed more pessimistically. The growth forecast for non-oil domestic exports has also been lowered to 4%, down from 6%. Nevertheless, the unemployment rate estimate for the year remains stable at 2.1%.

For the second quarter of 2024, GDP is projected to rise by 2.7% year-on-year, matching the growth rate from Q1. Expected headline inflation for Q2 is set at 2.8%, with core inflation also predicted to remain at 3%.

Looking ahead, Chua highlighted that there are signs indicating a potential recovery in manufacturing from the weak start in Q1, particularly in electronics. Underlying demand fundamentals are still robust, driven by advancements related to generative AI applications and positive base effects.

DBS and UOB forecast GDP growth for the full year at 2.2% and 2.9%, respectively. Liew expresses a more optimistic outlook for the second half of the year, anticipating a “more meaningful recovery” should the Federal Reserve initiate a rate-cut cycle, expected to start in September, thereby stimulating investment and consumption.

In terms of policy outlook, most economists believe monetary policy will remain unchanged during the MAS meeting in July. Only a small fraction of respondents foresee potential policy loosening, with no significant changes expected to the S$NEER policy band or its width.

Risks to the economic outlook are primarily linked to geopolitical tensions, with 57.1% of economists identifying this as the most significant downside risk, a rise from 50% in March’s survey. Other risks include inflationary pressures, external growth slowdowns, and weaker growth in China. On the upside, a stronger recovery in China was noted as a potential positive influence by 71.4% of respondents, while a faster-than-expected tech cycle recovery was also recognized as a significant upside risk.