Oversea-Chinese Banking Corporation’s (OCBC) Selena Ling has lowered her growth forecast for Singapore’s GDP in 2025 to 2.2% y-o-y from 2.7% y-o-y due to the high base from Singapore’s performance in 2024. Ling is the bank’s chief economist and head of global markets research & strategy.
Based on advance estimates released by the Ministry of Trade and Industry (MTI), Singapore’s 2024 GDP expanded by 4% on a y-o-y basis, which is the highest reading since 2021 and exceeding the official growth forecast and general market expectations.
The full-year figure was partly due to the growth momentum seen in the 4Q2024, which also surprised expectations with a 4.3% y-o-y growth and 0.1% q-o-q seasonally adjusted expansion. The Bloomberg consensus expected 4Q2024 GDP to be at 3.8% y-o-y while Ling forecasted the quarter’s GDP to come in at 3.1% y-o-y. Both expected the 4Q2024 GDP to dip by 0.8% and 1% on a q-o-q basis respectively.
“The growth support was broad-based, with manufacturing, construction and services growth still resilient at 4.2%, 5.9% and 4.3% y-o-y respectively in 4Q2024,” Ling notes.
She adds that there also many “growth levers” at the sectoral level to cheer for, with expansions seen mostly across the board.
“Notably, the retail trade sector remained the laggard even as wholesale trade was bolstered by machinery, equipment & supplies segments, and the transport & storage sector was supported by storage & other support services, air and water transport segments,” Ling adds.
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Despite a “blockbuster” 2024 and increased optimism over the improvement in global electronics, the economist believes that this year’s outlook is still largely marred by external headwinds including the expected tariffs from US President-elect Donald Trump, competition between the US and China, as well as geopolitical tensions. Trump will be inaugurated on Jan 20.
“While there is still significant uncertainty about the timing and magnitude of the anticipated tariffs, 1Q traditionally sees a moderation in activity due to the Chinese New Year holidays. While broad manufacturing sector may find some mitigating support from additional global supply chain recalibrations, the electronics frontloading activity may possibly take a temporary breather,” Ling notes.
At this point, OCBC’s Ling does not see any changes to the Monetary Authority of Singapore’s (MAS) monetary policy decision as core inflation only recently subsided below the 2% y-o-y level in November 2024 and the central bank may prefer to wait and see what happens when Trump is inaugurated.
The MAS, which is due to make its monetary policy decision by the end of January, is likely to issue an announcement in the middle or later part of the month given that the Chinese New Year break takes place on Jan 29 to 30.
“The next milestone to watch will be Budget 2025 due on Feb 18,” Ling says.
Oxford Economics downgrades 2025 estimate but remains above MTI’s forecast
Sheana Yue, economist at Oxford Economics, has also downgraded her GDP growth forecast to 3.2% for 2025, from 3.6% previously. Yue’s revised forecast still remains above the MTI’s official range of 1% to 3% for 2025.
The downgrade is mainly due to base effects as Yue maintains her growth trajectory of a gradual rebound over 2025 unchanged.
However, the economist notes that Singapore’s GDP was “broadly stagnant” and “broadly in line” in the 4Q2024, as the quarter expanded by just 0.1% q-o-q in seasonally adjusted terms, marking a “significant slowdown” from a 3.2% expansion in 3Q2024.
“The weakness was concentrated on manufacturing, which contracted. Services activity slowed. These more than offset the acceleration in construction activity,” she adds.
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That said, Yue expects the manufacturing sector to continue to grow in 2025 thanks to the still-solid demand for electronics. However, this is likely to be weighed down by domestic demand, which remains subdued.
DBS, UOB, RHB, Citi, Standard Chartered maintain estimates
Analysts from DBS Group Research, United Overseas Bank (UOB) and Citi Research have kept their 2025 estimates at 2.8%, 2.5% and 2.8% respectively, which are all within the upper end of MTI’s official range.
Despite “downside risks”, DBS economist Chua Han Teng believes Singapore’s prospects of economic growth are “bright” with a higher-than-expected full-year growth and a “robust” y-o-y expansion in the final quarter. Economic growth figures for the 1H2024 were also revised up, Chua points out.
“Singapore’s external-oriented sectors have ridden on improved external demand momentum in 2H2024, which we expect to be resilient at least through 1H2025, despite downside risks from rising geopolitical tensions, especially concerning trade under Trump 2.0,” he adds.
UOB’s economist Jester Koh also expects growth momentum in trade-related sectors to be sustained in early 2025 thanks to the ongoing upturn in the electronics cycle. Some front-loading of exports and ramp up in production ahead of Trump’s proposed tariffs on US imports are also tailwinds for growth.
However, Koh is less positive on the rest of 2025 as the outlook remains “clouded”. He also sees downside risks from further protectionist measures by Trump, elevated geopolitical tensions, a possible peak in the electronics cycle and uncertainty over the pace of monetary easing by major central banks.
“In our January 2025 monetary policy (MPS) preview, we have argued that while Singapore may face lower odds of direct tariffs from the US under a second Trump administration, the Singapore economy is unlikely to be shielded from spillover effects of a negative trade shock given its extensive reliance on trade as a small and open economy,” he writes.
RHB Bank Singapore's economists Barnabas Gan and Laalitha Raveenthar have kept their 2025 GDP forecast at 3% as Singapore's advance estimate for 4Q2024 also exceeded their expectations. The economists also predict the economy to grow by 3.8% on a y-o-y basis in 1Q2025.
With prices yet to decrease to pre-pandemic levels despite easing global inflation, Gan and Raveenthar believe that the MAS will keep its current policy parameters unchanged in the 1H2025, barring a "major economic shock" such as a recession.
"We believe the current S$NEER policy settings suit Singapore's price pressures. In its latest review, the MAS noted that the disinflation trend is 'well entrenched', though it cautioned about potential upside price risks. The central bank expects core inflation to finish the year around 2.0% and to average near the midpoint of its 1.5% - 2.5% forecast range in 2025, suggesting little need for monetary policy changes in the near future. The MAS, which uses the exchange rate rather than interest rates to control inflation, will reassess its policy stance later this month," the economists write. S$NEER stands for Singapore dollar nominal effective exchange rate.
Citi analyst Kit Wei Zheng’s unchanged 2025 GDP estimate implies a “mild narrowing of the larger-than-expected positive output gap”.
While the higher-than-expected 4Q2024 GDP advanced estimate implies a wider positive output gap at the end of 2024 than MAS’s assumptions, the 0.1% q-o-q expansion is below the expected trend of 0.5% to 0.7%.
This suggests that the positive output gap had narrowed in 4Q24, after widening in 3Q2024, says Kit.
“Importantly, the upper-end of MTI’s 1-3% forecast implies average growth of just 0.5% q-o-q, with the mid-point implying just 0.1% growth, and Citi’s 2.8% forecast implying average growth of 0.4%. Barring an unlikely scenario where MTI raises its 2025 forecast, this implies that the positive output gap is not expected to widen further, or more likely narrow,” he writes.
“As per our 2025 outlook, we see a cyclical moderation in electronics exports, though cushioned by stronger fixed investments, with consumer-facing sectors facing headwinds from increased economic uncertainty, moderating wage growth and diversion of resident spending overseas,” he adds. “An expansionary Budget 2025 may cushion growth via more transfers or lower inflation via subsidies.”
In his view, a 50 basis point (bps) slope reduction by the MAS could be a matter of “when” and not “if”.
“Even as the likelihood of inflation [below] 1.5% has fallen, we also note that today’s marginal 0.1% q-o-q seasonally adjusted expansion is lower than the 0.4% average in the quarter that preceded past slope reduction episodes, though the average 1.6% q-o-q seasonally adjusted rise in 2H2024 far exceeds the average in the two quarters prior to past easing episodes,” he says.
Standard Chartered economist and foreign exchange (forex) analyst in Asia, Jonathan Koh, believes that the MAS will ease its monetary policy in April via a 50 bps flattening of the slope to 1.0% per annum from 1.5% currently. He adds that the central bank may even make its move earlier in January.
Koh’s GDP forecast remains at 2.5%.
