Singapore revises 2024 growth forecast to 3.5% amid rising chip demand

Singapore has revised its 2024 economic growth forecast to 3.5%, exceeding earlier estimates of 2.0-3.0%, thanks to strong performance in manufacturing, wholesale trade, and finance.

The Trade and Industry Ministry attributed the boost to global demand for electronics, especially semiconductors, as the artificial intelligence (AI) boom spurred growth in key export markets, including the United States and the eurozone.

The city-state, often regarded as a global economic barometer due to its trade-dependent economy, also upgraded its full-year outlook for the second time this year following robust third-quarter data.

Singapore’s Q3 economic growth outpaces expectations

Singapore’s economy expanded by 5.4% year-on-year in the third quarter, exceeding economists’ forecasts of under 4.0% and a preliminary estimate of 4.1%.

This brought the year-to-date average growth to 3.8%, leading to the upward revision of the full-year forecast.

Key growth drivers included manufacturing, which surged 11.0% year-on-year, reversing a 1.1% contraction in the prior quarter, and wholesale trade.

The manufacturing sector’s rebound was fuelled by increased demand for smartphone and personal computer semiconductor chips, despite weaker demand for automotive and industrial chips.

Wholesale trade also benefited from this trend, capitalising on improved global trade dynamics.

AI boom boosts Singapore’s electronics exports

The ongoing AI revolution has been pivotal for Singapore’s electronics sector.

The surge in demand for semiconductors linked to AI applications significantly supported the city-state’s exports, which form a cornerstone of its economy.

Semiconductors for smartphones and personal computers saw robust growth, counterbalancing sluggish demand in other areas.

Singapore’s strategic positioning as a major trade hub allowed it to benefit from better-than-expected performance in key export markets, such as the United States, the eurozone, and regional economies.

Upgrades mark a second revision for 2024 growth forecast

This marks the second upgrade to Singapore’s economic growth projection in 2024.

In August, officials raised the estimate to 2.0-3.0% from 1.0-3.0%. The latest revision reflects stronger-than-anticipated global economic activity in the third quarter.

The ministry highlighted contributions from finance and insurance, alongside manufacturing and trade, as sectors bolstered by an upturn in the global electronics cycle.

Despite these gains, policymakers remain cautious. Global economic uncertainties, including potential shifts in US trade policies under a new administration, could impact Singapore’s growth trajectory in 2025.

Singapore’s economy for 2025

While Singapore’s economy demonstrated resilience in 2024, the outlook for 2025 is more subdued.

Growth is projected at 1.0-3.0% due to anticipated global economic challenges.

The ministry cited uncertainties surrounding US policy changes and risks to the global trade environment as potential headwinds.

These challenges could dampen the strong momentum seen in the electronics sector and trade-dependent industries.

Increased global inflationary pressures and geopolitical tensions are also expected to influence Singapore’s economic performance next year. Policymakers emphasised the need for vigilance, given the risks tilted to the downside.

Manufacturing remains a pillar of Singapore’s economy, contributing significantly to the third-quarter rebound.

The electronics cluster played a central role, benefiting from advancements in AI technologies.

Despite weaker performance in some segments, the overall manufacturing sector outpaced expectations, providing a solid foundation for economic recovery.

Analysts caution that external factors such as slowing global demand and trade tensions could pose challenges for sustained growth in manufacturing and related industries in 2025.