Singapore: Economy records best year-on-year growth reading since Q3 2022 in Q1 2024
A second release confirmed that annual GDP growth accelerated to 2.7% in the first quarter of 2024, from 2.2% in the fourth quarter of last year. Q1’s reading marked the strongest growth since Q3 2022. On a seasonally adjusted quarter-on-quarter basis, economic growth waned notably to 0.1% in Q1, compared to the previous quarter’s 1.2% increase, marking the worst reading since Q1 2023.
The annual improvement stemmed from quicker growth in public and private spending: Household expenditure rose by 5.8% year on year in Q1 (Q4 2023: +3.0% yoy), and government consumption surged by 6.0%, marking a three-year high (Q4 2023: +1.1% yoy). That said, fixed investment swung into contraction, falling by 2.3% in annual terms and contrasting Q4 2023’s 3.0% rise.
On the external front, growth in goods and services exports slowed sharply to 5.8% from the prior quarter’s 11.0% rise. Meanwhile, the expansion in imports moderated less sharply, reaching 7.1% (Q4 2023: 10.1%). Accordingly, net exports dragged on growth, declining 0.7% year on year compared to Q4 2023’s 15.6% rise.
Over the rest of 2024, annual GDP growth is set to decelerate marginally from Q1, but full-year growth will remain above 2023 levels as the global electronics sector upturn supports investment and exports. Delayed monetary policy easing in major economies and weaker-for-longer Chinese demand are downside risks, while a stronger-than-anticipated U.S. economy is an upside risk.
United Overseas Bank analyst Jester Koh commented on the outlook:
“Tight financial conditions stemming from peak interest rates in the US/EU may temper the extent of improvement in externally-oriented sectors in the near-term although these sectors could stage a more meaningful recovery in 2H24 should the Federal Reserve and/or ECB commence their rate cut cycles, which may stimulate investment and consumption activity abroad. […] We maintain our 2024 GDP growth forecast at 2.9%, which sits at the upper end of MTI’s unchanged forecast range of 1.0-3.0%.”
EIU analysts added:
“External demand will pick up pace in the second half of 2024, underpinned by the more pronounced recovery in the electronics sector, providing a boost to Singapore’s external sector. Investment growth will pick up in 2024 as the external sector recovers. As inflation eases towards pre-pandemic levels in 2025, MAS will have more room to pursue further monetary policy easing. This will benefit private consumption and investment, and will provide additional momentum to economic growth.”