SINGAPORE, January 10, 2025 – The Singapore economy is estimated to have strengthened to 4.0 percent in 2024 driven by a turnaround in exports and resilient domestic demand. With inflation moderating but risks of higher inflation persisting, maintaining the tight monetary policy stance is appropriate. This policy has anchored inflation expectations, while complementary targeted fiscal support has alleviated the rising cost of living.
These conclusions are highlighted in the 2024 Annual Consultation Report on Singapore published by the ASEAN+3 Macroeconomic Research Office (AMRO) today. The report was based on AMRO’s Annual Consultation Visit to Singapore from June 24 to July 18, 2024, and data and information available up to October 23, 2024.
Economic developments and outlook
Singapore’s economic growth moderated to 1.1 percent in 2023 from 3.8 percent in 2022, on account of slower growth in the manufacturing and services sectors. The manufacturing sector, particularly electronic products, continued to weaken in 2023, contracting by 4.3 percent as external demand weakened. Growth in the services sectors also slowed to 2.3 percent, amid fading tailwinds from domestic revenge spending and tourist activity. However, the construction sector picked up by 5.2 percent, as the return of foreign labor following the post-pandemic reopening eased the labor supply constraint. Growth is estimated to have strengthened in 2024 to 4.0 percent driven by a turnaround in exports and resilient domestic demand.
Inflation has sustained a downward trend, slowing from a peak of 7.5 percent in September 2022 to 1.6 percent in November 2024. The continued moderation is in part attributable to the decline in Certificate of Entitlement (COE) prices and car ownership cost, as well as falling food inflation in line with decreasing imported costs due to the appreciating nominal effective exchange rate. Average headline inflation is estimated to be 2.8 percent in 2024.
Non-oil domestic exports fell sharply by 13.1 percent in 2023 due to weak semiconductor demand and lower export prices. However, signs of recovery emerged in early 2024, led by electronics exports. The external position remains strong with higher foreign direct investment (FDI) inflows and ample international reserves.
Elevated, albeit moderating, inflation amid firm domestic demand prompted the Monetary Authority of Singapore (MAS) to maintain the current tight monetary policy stance. The rate of appreciation and policy band of the Singapore Dollar Nominal Effective Exchange Rate (NEER) was kept unchanged since its last upward adjustment in October 2022. Gradual appreciation of NEER and subdued price pressures from food and energy are expected to support further moderation of inflation.
The FY2023 fiscal position shifted into a deficit, reversing the small surplus in FY2022, mainly due to additional transfers to households. The overall fiscal position is projected to shift to a slight surplus of 0.1 percent of GDP in FY2024 as operating revenue is projected to remain stable while top-ups to endowment and trust funds would be lower.
Risks, vulnerabilities, and challenges
General macrofinancial stability risks to the overall economy receded in 2024 compared with the previous year, albeit with some remaining pockets of risks and vulnerabilities. A spike in commodity prices or tighter labor market conditions could lead to a resurgence of inflation. Global energy prices could surge due to intensifying geopolitical tensions and production cuts by major energy producers.
Slower growth in major trading partners could dampen exports recovery. Growth slowdown in China—Singapore’s largest trading partner—due to protracted weakness in its property sector could weigh on its investments and imports. The United States could experience sharper growth moderation and new financial vulnerabilities. Aggressive protectionist policies by the incoming US Administration could disrupt trade and investment flows. In the long term, Singapore’s fiscal spending will be significantly strained by higher costs of healthcare and social protection amid an aging population, and increased expenditure to safeguard climate resilience.
Policy recommendations
The current tight monetary stance of MAS to contain and anchor inflation expectations remains appropriate. However, the authorities should be ready to recalibrate the policy if downside risks were to materialize.
The FY2024 neutral fiscal stance is appropriate given the moderating inflation and a near-zero output gap, and the continued focus on Singapore’s longer-term priorities is commendable. AMRO supports the continued near-term focus of helping lower-income households and businesses cope with higher costs of living and doing business through targeted and calibrated policies.
AMRO supports the authorities’ key priorities in fostering a more productivity-driven economy and equitable society through growth-enhancing fiscal spending. Notwithstanding longer-term labor productivity challenges, AMRO welcomes the progress in enhancing labor market resilience by providing financial support scheme for involuntarily unemployed workers, promoting flexible work arrangements, and adopting measures to support productive aging. The authorities should continue with its commendable efforts on green transition and with its program of reskilling and upskilling the workforce to strengthen Singapore’s competitiveness.
About AMRO
The ASEAN+3 Macroeconomic Research Office (AMRO) is an international organization established to contribute toward securing macroeconomic and financial resilience and stability of the ASEAN+3 region, comprising 10 members of the Association of Southeast Asian Nations (ASEAN) and China; Hong Kong, China; Japan; and Korea. AMRO’s mandate is to conduct macroeconomic surveillance, support regional financial arrangements, and provide technical assistance to the members. In addition, AMRO also serves as a regional knowledge hub and provides support to ASEAN+3 financial cooperation.
About AMRO’s Annual Consultation Report
The Annual Consultation Report was prepared in fulfillment of AMRO’s mandate. AMRO is committed to monitoring, analyzing and reporting to its members on their macroeconomic status and financial soundness. It also helps identify relevant risks and vulnerabilities, and assists members, if requested, in the timely formulation of policy recommendations to mitigate such risks.