SINGAPORE: The economy grew in the first quarter of 2024 at its weakest pace in a year, dragged by slower expansion of the export-driven manufacturing sector, according to the final estimates released by Singapore’s Trade and Industry Ministry (MTI).

On a quarter-on-quarter seasonally adjusted basis, the economy expanded by 0.1% in the January to March period, slower than the 1.2% growth in the fourth quarter of 2023, the MTI said.

It was the weakest pace of growth since a 0.5% contraction in the first quarter of 2023.

The base effect, when compared with the same period in 2023, helped the economy post year-on-year growth of 2.7%, higher than the 2.2% expansion in the fourth quarter of 2023.

However, it still missed a median forecast of 3% by economists in a Bloomberg News poll.

The MTI kept its full-year 2024 gross domestic product (GDP) growth forecast of 1% to 3%, saying that Singapore’s manufacturing and trade-related sectors are expected to see a gradual pickup in growth over the course of the year.

“Within the manufacturing sector, the electronics cluster is projected to recover gradually in the coming quarters, supported by demand for semiconductors for end-markets such as smartphones, personal computers and artificial intelligence,” MTI said in a statement.

However, the ministry warned that Singapore remains vulnerable to downside risks in the global economy.

“Escalations in geopolitical tensions in the Middle East or the war in Ukraine could disrupt global supply chains and commodity markets,” it said.

Additionally, if inflation remains stubborn in advanced economies, central banks there could further tighten financial conditions and potentially trigger latent vulnerabilities in banking and financial systems.

Also, vulnerabilities in emerging markets arising from a desynchronisation of their monetary policy cycles with that of advanced economies could lead to greater volatility in capital flows and currency fluctuations, said MTI.

Beyond the immediate risks, central banks in advanced economies are still expected to cut their benchmark interest rates later in 2024 as inflation eases, which should help support global growth.

“Looking ahead, GDP growth in the major economies is expected to taper gradually in the immediate quarters due to tight financial conditions, before picking up alongside anticipated policy rate cuts later in the year,” Gabriel Lim, MTI’s permanent secretary, said in a virtual media briefing.

Edward Robinson, deputy managing director and chief economist of the Monetary Authority of Singapore (MAS), said at the briefing that MAS’ current policy stance - favouring trade-weighted appreciation of the Singapore dollar against currencies of its trading partners -remains appropriate to keep inflation at bay.Meanwhile, a strong pickup in services could help mitigate some of the downward pressure from the global economy.

Even as the manufacturing sector contracted by 1.8% year on year and by 5.4% quarter on quarter in the first three months of 2024, the services sector expanded by an annual 3.9% and 1.9% on the quarter.

“The stronger than anticipated recovery in air travel and tourism demand will continue to bolster the growth of aviation- and tourism-related sectors such as accommodation, air transport and aerospace, as well as consumer-facing sectors such as retail trade and food and beverage services,” said MTI.At the same time, the finance and insurance sector will be supported by higher tourist spending, which will benefit the payments segment, as well as the projected peaking of global policy interest rates which will support the banking and fund management segments through higher commissions and fees, it added.

The sector expanded by 6.5% year on year, up from the 5.4% growth in the preceding quarter. On a quarter on quarter seasonally adjusted basis, the sector’s growth was flat, weaker than the 4.1% expansion in the previous quarter.

While the electronics industry was among the weakest performers in the manufacturing sector, MTI remained hopeful of a potential turnaround.

It said growth in the electronics cluster will in turn have positive spillover effects on the precision engineering cluster, as well as the machinery, equipment and supplies segment of the wholesale trade sector.

Enterprise Singapore (EnterpriseSG), which also released the trade data for the first quarter on May 23, said the increase in 2024 key exports was likely to come in at the lower end of its 4% to 6% growth forecast due to a disappointing start to the year.

Non-oil domestic exports fell 3.4% in the first quarter of 2024, following a 1.4% decline in the previous quarter.

MTI data showed that in the first quarter, the construction sector grew by 4.1% year on year, extending its 5.2% expansion in the fourth quarter of 2023. However, on a quarter-on-quarter seasonally adjusted basis, the sector contracted by 2% as output fell in the private sector.

The wholesale trade sector grew by 1.5% year on year, faster than the 0.2% growth in the preceding quarter. The retail trade sector expanded by 2.7% year on year, a reversal from the 0.3% contraction in the previous quarter.

Growth in the transportation and storage sector picked up to 6.8% year on year, from 2.8% in the fourth quarter. Within the sector, the air transport segment recorded robust growth, with the total number of air passengers handled at Changi Airport during the quarter coming in above its pre-Covid-19 level.

The accommodation sector expanded by 14.4% year on year, accelerating from the 1.5% expansion in the preceding quarter.

 - ANN