Experts caution on 2Q24 GDP growth after April manufacturing drop

Manufacturing output fell by 1.6% YoY in April.

Experts raise red flags for Singapore 2Q24 GDP growth following the 1.6% YoY April manufacturing drop.

RHB predicts 2Q24 GDP growth may slow to around 1.5%, despite expectations of acceleration in 2H24.

“The [April] official print reinforces our 2Q24 GDP projection, which suggests that the contraction could potentially affect Singapore’s economic outlook. We believe further declines are possible in Singapore’s externally oriented sectors this quarter. Notably, 1Q24 manufacturing growth has been significantly downgraded to -1.8% YoY, from the previous official estimate of +0.8% YoY,” RHB said.

“Meanwhile, a positive aspect is Singapore's services industries, which are expected to drive the majority of the country's growth,” RHB said.

Nomura shared a similar sentiment, stating that services will benefit from the strong tourism recovery, aided by visa exemptions for tourists from China, alongside improvements in the trade-related segment.

Longer-term prospects, however, remain positive, with Nomura expecting full-year GDP growth of 3.0%.

“Our more optimistic view is underpinned by the global tech turnaround, which should ultimately provide a strong boost to the manufacturing sector,” Nomura said.

UOB also remains optimistic, especially about recovery prospects in the electronics and semiconductor sectors, citing supportive base effects in 2Q-3Q24 and strong underlying demand fundamentals.

Generative AI-related applications are expected to provide a structural boost that positively impacts 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 said.