Singapore’s economic horizon appears to be clearing up, with the Monetary Authority of Singapore (MAS) predicting an uptick in the latter half of 2024. But while some sectors show promising growth, others face challenges, and inflation remains a key concern. The central bank’s latest report also points to potential challenges for the country’s middle-income workers in the future.
Recovery on the Horizon
The MAS, in its recent half-yearly macroeconomic review, highlighted the third quarter of 2023 as a potential turning point in the economic downturn. After grappling with what they termed an “effective standstill” since late 2022, growth is expected to regain momentum in the second half of 2024. This comes as global tech industries rebound and international interest rates stabilize. The MAS expects growth for 2024 to inch closer to its potential rate.
However, the economic growth for the current year is anticipated to linger in the modest bracket of 0.5 to 1.5%.
Sectoral Performance: Hits and Misses
Post the declaration of COVID-19 as endemic, domestic sectors have observed a more pronounced growth, though some sectors like construction and F&B didn’t pick up as swiftly. The reopening of borders post-pandemic saw a surge in the travel industry, with international arrivals nearing 81% of pre-COVID figures. Significantly, tourists from China have once again taken the lead.
While segments like information and communications, architectural and engineering, and accounting flourished, manufacturing and financial services grappled with challenges in 2023. Nonetheless, the third quarter seems to have stemmed the slowdown, with manufacturing output likely at its lowest and a potential revival in financial services on the horizon as interest rates reach their zenith.
Inflation: An Easing Trend Amidst Volatility
After starting the year at a staggering 14-year high of 5.5%, core inflation is set to decrease to between 2.5 and 3% by December. Despite monthly fluctuations in electricity and gas prices, other sectors like food have seen declining prices. The robust Singapore dollar plays a pivotal role in cushioning against external inflationary influences.
However, early 2024 may witness a spike in both headline and core inflation, influenced by the rise in Goods and Services Tax (GST) to 9% and the introduction of public transport fare hikes.
Concerns for the Middle-Income Group
Despite enjoying the swiftest wage growth in the past decade, Singapore’s middle-income earners could confront challenges. Technological advancements and demographic shifts might displace middle-income workers unless they adapt and evolve. The MAS emphasizes the importance of continuous skill upgrading and policy interventions aimed at enhancing the income of the middle and lower segments.
In concluding, the MAS report underscores the importance of safeguarding the income growth of the broad middle sector, calling it foundational for the nation’s sustained and inclusive economic progress.
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