(Bloomberg) — Singapore maintained its economic growth outlook for 2024 as improving prospects for the US and China gave the city-state reason to look past risks from geopolitical tensions and diverging monetary policy paths globally.
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The government kept the gross domestic product growth forecast for Singapore this year unchanged at 1% to 3%, while confirming that the economy’s first-quarter expansion was as fast as initially estimated, according to data from the Ministry of Trade and Industry on Thursday.
The growth of 0.1% in the January-March period from the previous three months was stronger than the median 0.3% contraction seen by economists surveyed by Bloomberg. The economy expanded 2.7% on a year-on-year basis, also faster than the median 2.5% growth seen in the survey.
Singapore expects to benefit from improving US growth prospects and a stronger than anticipated expansion in China, while also penciling in gains from robust travel and tourism demand. Still, the trade-reliant city-state said that risks to the outlook remain in the form of escalations in geopolitical tensions in the Middle East or the war in Ukraine, along with a global desynchronization of monetary policy cycles.
That could lead to greater volatility in capital flows and currency fluctuations, the ministry said.
The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool rather than interest rates, has stood pat for four straight meetings through April, maintaining the appreciating path of its exchange rate. That’s allowed the central bank to check imported inflation, with MAS Deputy Managing Director Edward Robinson saying in March that policy is “appropriately restrictive” to ensure that core inflation declines to 2% by early 2025.”
For 2024, the MAS expects both headline and core inflation to come in between 2.5%-3.5%. The core gauge cooled to 3.1% in March and analysts expect the rate of price gains to stay at the same level in April in data due later Thursday.
Singapore, which witnessed a rare transition of power that saw Lawrence Wong assume office as prime minister this month, is navigating a number of challenges from the high cost of living to foreign talent anxiety, income inequality and tumultuous geopolitics. Its position as a financial and tech hub is being tested by rivals emerging around the world. AI and other transformational technologies are disrupting the city’s workforce, threatening its relevance.
Wong, who retains charge of the Finance Ministry, had warned in his February budget speech that a protracted period of slow growth would erode living standards, saying the external environment has “darkened dramatically” while an aging population at home also poses challenges.
On the upside, the island’s government expects the finance and insurance sector to be supported by higher tourist spending which will benefit the payments segment. A separate report showed Singapore maintained its forecast for merchandise trade and non-oil domestic exports at 4% to 6%.
–With assistance from Tomoko Sato and Kevin Varley.
(Updates with context on MAS policy stance from the sixth paragraph.)
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