When OKH Global announced it wanted to acquire the construction business of privately held Acrophyte (formerly known as Chip Eng Seng Corp) from its own controlling shareholders, it disclosed that the target’s construction order book as at June 30 was “in excess of $2 billion — a big jump from the last disclosed order book of $1.36 billion as of end 2021. If not for this deal involving the listed OKH Global, the investment community wouldn’t have noticed how the former Chip Eng Seng, despite being taken private and having diversified into hospitality, education and other industries, has gone from strength to strength in its construction business.
Industry insiders, of course, would not be surprised. Several other listed building contractors have reported healthy growth in their order books in the past year. Koh Brothers Eco Engineering announced a new government contract on November 19, and another major deal worth $313.9 million on Dec 25, bringing its total order book to $899.7 million; OKP Holdings , after securing a whole series of road and pavement improvement works, had an order book of $706.9 million as at June 30 — a record high.
Soilbuild Construction Group, another listed contractor, topped them all with its June contract of $647.5 million to build facilities at the Tuas Port. Coupled with a slew of other contracts subsequently, its order book is now some $1.23 billion.
If these stronger order books can be interpreted as applicable across the whole construction sector, that means this industry is likely to grow even faster in 2025 versus 2024, even though Singapore’s overall GDP is seen to slow instead because of cloudier global macroeconomic conditions. “Easing monetary conditions, a generous election Budget and construction of major projects will help cushion the uncertainty and shock from Trump’s global trade war,” state Maybank economists Chua Hak Bin and Brian Lee Shun Rong.
From a projected 2024 GDP growth of 3.6%, they expect Singapore’s growth to slow to 2.6% this coming year and ease further to 2.3% in 2026. The positive outlook for the construction sector is thanks largely to the pipeline of “mega” public sector infrastructure projects: Changi Airport’s Terminal 5, worth some $10 billion; the Tuas Megaport, costing some $20 billion, and various other ongoing MRT and highway works.
The private sector’s contribution will be anchored by the multi-billion-dollar expansion of the two integrated resorts, $8 billion for Marina Bay Sands and $6.8 billion for Resorts World Sentosa. In addition, there is a ramp-up in HDB flats construction, from 100 projects in 2023 to 150 this coming year. Furthermore, a revival in new private home sales in recent months will also help keep the industry busy. All in, the Maybank economists expect the construction sector to grow at 6.5% in 2025, a pick up from 4% seen this year.
This coming year will be an election year and Maybank believes the Budget next February will be “generous and mildly expansionary”.
Core CPI has surged by 12.3% over the past five years, at a pace more than double that of the preceding five years, making costs of living an increasingly pressing issue. “We expect the government to unveil more initiatives to help households with living costs ahead of the 2025 elections. There could be more handouts in the form of cash, grocery vouchers and utility rebates, and possibly more subsidies for bigger ticket items like healthcare, childcare and education,” says Maybank.
Specifically for Budget 2025, the last of the current electoral term, Maybank sees “room to ramp up fiscal spending”, especially also given how tax collection has increased significantly. “There is leeway to run an expansionary fiscal stance, while maintaining an overall fiscal surplus shored up by higher net investment returns from national reserves, a capitalisation of infrastructure spending, and a smaller quantum of fund top-ups, which are monies set aside for future use on specific objectives.”
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Maybank expects corporate and personal income tax rebates given strong revenue collection, further competition for investments from multinational companies and concerns over the global minimum tax.
Similarly, Nomura believes that Budget 2025 will be expansionary too, providing support especially in the face of external risks in the form of sharply weaker global growth, a bigger downturn in the tech cycle, and higher global trade protectionism.
“Domestically, while we think this is a low-probability outcome, concerns over policy continuity could emerge if the incumbents do not receive a strong mandate from the general elections,” warns Nomura.
Economists at the Japanese bank also caution that geopolitical tensions that lead to a resurgence in international energy and food prices and causes extended supply chain disruptions would pose upside risks to core inflation, which would then compel the Monetary Authority of Singapore (MAS) to keep the Singdollar at a relatively high value versus the basket of currencies it marks itself against.
On the other hand, if the broader tech sector prolongs its current bullish trend, that is positive for Singapore. “Safe haven inflows and positive household wealth effects, if asset prices remain buoyant, could add to upside risks,” adds Nomura.
Source: CEIC / Maybank
