In a recent evaluation of economic trends, the Ministry of Trade and Industry of Singapore shared its preliminary estimates for the fourth quarter and the entire year of 2024, painting a picture of resilience amid uncertaintiesThe report indicated that Singapore's GDP is projected to grow by 4.3% in the fourth quarter of 2024, contributing to an impressive annual growth rate of 4.0%. This marks a significant uptick compared to the dismal 1.1% growth in 2023 and exceeds the government’s earlier forecast of 3.5% growth for 2024. These figures suggest that despite facing tumultuous global conditions, Singapore's economy is poised for a commendable performance, bolstered by accelerated technological innovations.

However, this optimism is tempered by signs of economic decelerationThe 4.3% growth rate in the last quarter of 2024 is notably lower than the 5.4% increase reported in the previous quarter

Adjusting for seasonal fluctuations, the quarter-on-quarter growth for Q4 was a mere 0.1%, a stark contrast to the 3.2% growth seen in Q3. As per projections from November 2024, the Ministry anticipates an even slower economic growth for 2025, predicting a range of just 1% to 3%.

When delving deeper into industry-specific performances, manufacturing did report a year-on-year growth of 4.2% in Q4, continuing from a strong 11.1% growth in Q3, although the momentum appears to be less vigorousThe construction sector demonstrated resilience with a 5.9% year-on-year increase compared to a 4.7% rise in the preceding quarterMeanwhile, the services sector saw a modest uptick with a 4.3% growth, slightly above the 4% growth recorded in Q3. Overall, each sector exhibited year-on-year growth, with manufacturing achieving a 3.5% increase, construction at 4.8%, and services at 4.1%.

The firm performance in 2024 provides an interesting outlook contrasted against the variability of quarterly data

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Reflecting Singapore's characteristic openness to global trade, GDP growth was recorded at 3.0% in Q1, 2.9% in Q2, 5.4% in Q3, and then 4.3% in Q4. Such fluctuations highlight the economy's sensitivity to external factors including geopolitical tensions and unpredictable global consumer demand.

Several key factors contributed to the stronger-than-expected economic growth in 2024. Firstly, the recovery within the manufacturing sector has played a critical roleThe sector experienced fluctuations, with Q1 seeing a decline of 1.7%, Q2 a modest 0.5% growth, followed by a surge in Q3 at 11.1%, and stabilizing at 4.2% in Q4. The electronics industry, which constitutes nearly half of the manufacturing output, emerged as a significant driver of this growth, indicating a general uplift in order intake, exports, production, and investments.

Secondly, the services sector remained robust

The sector reported balanced growth with Q1 at 4.3%, Q2 at 3.3%, Q3 at 4.0%, and culminating at 4.3% in Q4. Key segments fueling this expansion include finance, insurance, information and communication, transportation, logistics, wholesale trade, tourism, and professional services, all making notable contributions to the economy’s overall performance.

Moreover, construction maintained its steady growth trajectory with a year-on-year increase of 4.1% in Q1, progressing to 4.3% in Q2, 4.7% in Q3, and finally reaching 5.9% in Q4. This growth is largely attributed to a burgeoning demand for public sector projects alongside ongoing private sector endeavors, thus undergirding a robust construction industry.

A crucial element to consider is the expansion of the labor market, illustrated by the most recent labor market report published by the Ministry of Manpower in December 2024. The data revealed employment growth with an increase of 4,700 jobs in Q1, 11,300 in Q2, and 22,300 in Q3. By the publishing of the report, local employment had risen for twelve consecutive quarters to a total of 3,736,900 workers

This growth in the workforce underlines not only economic progress but also bolsters the overall stability of the job market, particularly in key areas such as finance, insurance services, information and communication, public administration, healthcare, and education.

Despite the positive indicators, Singapore's economy faces numerous challenges moving forwardAccording to a national business survey conducted by the Singapore Business Federation, released on January 2, 2025, about 40% of businesses expressed satisfaction with the current commercial environment, a significant increase from the previous quartersThis suggests growing confidence among enterprises about the future economic landscape.

However, companies highlighted three primary challenges affecting their operationsThe foremost concern was the persistent high labor costs, with 66% of businesses facing pressure in this regard

Despite rising operational costs, 57% of the businesses managed to maintain or enhance their profitability, while 43% experienced a decline, with an average decrease of 27.5%.

The second issue was uncertainty in customer demand, which saw an increase from 30% in 2023 to 45% in 2024. The hospitality, restaurant, and accommodation sectors were notably affected, with 80% citing concern, followed by retail trade at 75% and wholesale trade at 59%.

Further exacerbating their challenges is the rapid escalation in rental costsThe proportion of businesses affected by rental pressures rose from 36% in 2023 to 43% in 2024. In response to these looming challenges, companies are actively seeking governmental supportNotably, Singaporean enterprises identified three key requests for the 2025 budget: addressing cost pressures (64%), attracting and retaining local talent (43%), and managing foreign labor issues (41%).

In addition to these immediate hurdles, Singapore anticipates facing further risks from heightened protectionism, the impact of American tariff barriers, potential disruptions to global supply chains, rising manufacturing costs, and a looming slowdown in the global economy