Economy records best year-on-year growth reading since Q3 2022 in Q1 2024

According to a flash release, GDP growth accelerated to 2.7% year on year in the first quarter of 2024, from 2.2% in the fourth quarter of last year. Q1's reading marked the strongest growth since Q3 2022. On a seasonally adjusted quarter-on-quarter basis, economic growth waned notably to 0.1% in Q1, compared to the previous quarter's 1.2% increase. Q1's result marked the worst reading since Q1 2023.

Looking at available data, the improvement stemmed from the services sector, which grew 3.2% in Q1 (Q4: +2.0% yoy) thanks to stronger activity in the wholesale and retail trade plus the information and communication subsectors. Less positively, the industrial sector lost steam and grew 1.4% annually in the first quarter, decelerating from the fourth quarter's 1.9% increase; both manufacturing and construction output grew less than in the prior quarter.

In the remaining quarters of this year, annual GDP growth is set to decelerate marginally due to a progressively tougher base of comparison, though the economy should accelerate in sequential terms as the global electronics sector upturn supports the external sector.

DBS analysts Chua Han Teng and Philip Wee are upbeat on the outlook: “We continue to expect better growth prospects in 2024 vs a muted 2023. The growth recovery will be mainly supported by a gradual improvement in external-led sectors. While global economic data have surprised on the upside in early-2024, the outlook remains uncertain. Uncertainties come from the timing and magnitude of potential US Fed interest rate cuts, bumpy China economic conditions, and lingering geopolitical tensions that could still disrupt global supply chains.” Nomura analysts are similarly optimistic: “We maintain our 2024 GDP growth forecast at 3.0%, well above the consensus forecast of 2.3% and at the upper end of the official forecast range of 1.0-3.0%. Our more optimistic view is underpinned by the global tech turnaround, which should ultimately provide a strong boost to the manufacturing sector, despite the soft patch in Q1. This improvement should further fuel growth in the services sector, which is also benefiting from tourism.”

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