Economists cut 1Q24 GDP forecast amid weak March manufacturing

Manufacturing output fell 3.2% YoY in March.

Economists have cut the GDP growth forecast for 1Q24 to 2.2% in light of the weak industrial production print in March.

The Ministry of Trade and Industry (MTI) anticipates GDP growth to reach 2.7%.

"We were surprised at the softness in March’s manufacturing performance, even as we continue to see signs that consumer and semiconductor-related demand remain supported," RHB said.

UOB had a similar estimate, saying that the March IP could imply a material 0.5%-pt downward revision to the final 1Q24 GDP reading to 2.2% YoY should GDO growth rates in other sectors remain unchanged.

RHB attributed the weak manufacturing print in 1Q24 to two reasons, one being that Singapore is dealing with a high base in March 2023.

In March 2023, manufacturing output grew 4.5% MoM, marking the highest sequential print in 10 months.

The relatively volatile biomedical sector, especially the pharmaceutical cluster, could have also contributed to the decline of output in 1Q24.

"It is essential to note that semi-conductor-related clusters such as the precision engineering cluster, led by machinery & systems, as well as consumer-related segments such as infocomms and consumer electronics, continued to rise on a sequential and annual basis, basically shadowing the continued recovery in key economies such as US and China,” THB said.

Despite the upsetting figures in March, RHB and UOB remain optimistic about manufacturing growth,

“Our global growth assumption remains sanguine. We believe the US and China will expand above consensus this year, suggesting that Singapore, a trade-reliant economy, will benefit from the ongoing growth in key trading partners,” RHB said.

UOB said it remains optimistic about the recovery prospects in the electronics and semiconductor sectors “given supportive base effects in 2Q-3Q24 and underlying end demand fundamentals remain intact, driven by the structural boost from generative AI-related applications which has positive spillovers to the consumer segment.”

“Furthermore, the anticipated easing of financial conditions as central banks in major advanced economies begin to reduce policy rates towards the latter half of the year could provide some tailwinds to global investment and consumption activity,” UOB added.