• Singapore’s fourth prime minister, Lawrence Wong, was sworn in May 15. He may call for an earlier general election to affirm his mandate ahead of the ruling People’s Action Party’s (PAP) 70th anniversary and its 38th Central Executive Committee elections in November, although the window for elections to take place this year is quickly closing.
  • The 2024 GDP growth forecast falls within the range of 1-3 percent. Core and overall inflation are still projected to be elevated at 2.5-3.5 percent before potentially tapering off by the fourth quarter.
  • Singapore is doubling down on integrating artificial intelligence (AI) across various sectors to position itself as a global deep tech hub. Having employed a light-touch approach to AI, the government must consider the need for robust regulatory frameworks, especially if a general election is around the corner, while facilitating an investment environment conducive to innovation.
  • Singapore expects a slower long-run growth plan with higher costs in the future given resource constraints and rising expenses in the years to come.
  • Singapore is set to introduce the income inclusion rule and the domestic top-up tax components of Pillar Two in 2025. To ensure that the country remains attractive for foreign investment, the Economic Development Board plans to release further details of the new Refundable Investment Credit scheme in the third quarter of 2024.
  • The Ministry of Trade and Industry is expected to delay the release of details on the Carbon Tax Transition Framework until 2025, stemming from complexities involved in detailing the framework.
  • A new temporary financial support scheme for retrenched workers is set to commence in late 2024 to provide a more robust safety net for the middle class amid a more volatile economic environment.
  • Public consultations for Singapore’s Health Information Bill closed in January, but the bill remains in the drafting stages, delaying its tabling and passing.

Singapore Market Overview and Forecast

Political Climate

Leadership Transition on Track With Imminent General Election

Lawrence Wong was sworn in as Singapore’s fourth Prime Minister May 15, with minor Cabinet changes. With his predecessor Lee Hsien Loong’s transition to senior minister, Wong promoted Minister for Trade and Industry Gan Kim Yong to serve as deputy prime minister alongside Heng Swee Keat. All signs had previously pointed toward Gan’s retirement, especially after he stepped down as chairman of the ruling PAP in November 2022. Nevertheless, Gan and Wong clearly developed mutual trust and chemistry after co-chairing the multi-ministry task force on COVID-19 together. Companies should be reassured that despite the momentous transition to a new prime minister, Wong will be advised by experienced deputies, with minimal changes to the rest of the Cabinet. Although new, younger faces were brought in as political officeholders at the junior level, continuity remains key in the coming months.

As a new leader, Wong may wish to call for a general election — which must be held no later than November 2025 — earlier rather than later so he can secure and affirm his mandate from the general populace. BGA sources indicate this could happen as early as September 2024, before the PAP’s 70th anniversary and Central Executive Committee election in November, or after the next budget in February 2025. Important milestones that will provide clearer indications of when the general election might take place include the formation of the Electoral Boundaries Review Committee and the delivery of Wong’s first National Day Rally speech in mid-August, which coincidentally will mark his first 100 days as premier.

The window for general elections to take place this year is quickly closing, especially with opposition leader Pritam Singh’s trial over alleged lies to Parliament set to take place in October and November. Wong will need to focus on immediate concerns around the rising cost of living and the availability of jobs as he continues to implement recommendations from his landmark initiative Forward Singapore, which aims to strengthen Singapore’s social compact. He will need to work closely with his deputies to balance this with ensuring that Singapore remains an attractive business hub even as it implements the minimum effective tax rate in 2025.

Macroeconomic Climate

Short-Term Economic Growth Robust, Long-Term Continuity Uncertain

Singapore’s economy is poised to strengthen throughout 2024, with growth becoming broader based and the slightly negative output gap narrowing in the latter half of the year. The growth forecast falls within a range of 1-3 percent, after a 1.1 percent expansion in 2023. The manufacturing and financial sectors will be buoyed by an upturn in the electronics cycle and an anticipated easing of global interest rates, respectively, although manufacturing will likely play a smaller role in driving growth. Domestic-oriented sectors such as construction, retail trade, land transport and food and beverage services are also projected to normalize, gradually returning to pre-pandemic growth rates.

The Monetary Authority of Singapore (MAS) has maintained an unaltered monetary policy stance as it looks to strengthen the trade-weighted Singapore dollar to counter inflationary pressures. Both MAS and the Ministry of Trade and Industry upheld 2024 inflation estimates, projecting core and overall inflation of between 2.5-3.5 percent. Core inflation is expected to remain elevated, gradually tapering off only by the fourth quarter and continuing into 2025. MAS attributes this to increases in utilities, education and health care costs.

MAS cautions that Singapore will eventually encounter a slower long-run growth plan with higher costs. Resource constraints and rising expenses are expected to exert greater pressure in the years ahead. The global economy will likely encounter cost headwinds, with growth increasingly constrained by supply-side issues, which could then lead to higher import prices. Geoeconomic fragmentation, diversification of supply chains and the ongoing energy transition will add to cost pressures; geopolitical tensions and inflationary pressures remain the top risks to the Singapore economy. Labor costs are also expected to rise, particularly in lower-productivity sectors with the most stringent constraints.

Investment Environment

Prioritizing Innovation To Drive Strategic Growth

With global disruptions increasingly becoming the norm, Singapore is actively reinforcing its position as a regional powerhouse. The strategic channeling of resources into key sectors, as outlined in the 2024 budget, are a linchpin of the government’s broad push to catalyze economic growth and increase market opportunities for businesses alongside the alignment of its tax landscape with the global consensus of the BEPS 2.0 initiative. The government will welcome high-value investment from the private sector that aligns with its significant pooling of investment in focus areas such as financial services, AI and green technology. This will enhance companies’ competitive edge and ability to contribute to Singapore’s dynamic economic expansion.

Beyond accelerating the integration of AI and machine learning technologies across various sectors, Singapore is focused on establishing itself as a global deep tech hub, launching new research and development translational platforms to spearhead advancements in semiconductors, medical technologies and robotics. These new research and development translational platforms, spearheaded by A*STAR in conjunction with other government agencies and local institutes of higher learning, indicate that the Research Innovation and Enterprise 2025 Plan will likely be renewed for the next five years. Companies should consider expanding collaboration strategies to adopt a tripartite model that includes government, academia and industry. Aligning academic research directly with industry needs and government support will help enhance the commercial viability of emergent technologies.

Balancing Promotion of AI for Good While Tackling Associated Challenges

The government is acutely aware of the challenges and risks associated with the rapid deployment of AI and deep tech technologies. Issues such as copyright infringement and the proliferation of deepfakes are on the rise, prompting concerns about security, privacy and the integrity of information. The government’s economic growth strategy is expected to take on a dual approach in considering the need for robust regulatory frameworks while facilitating innovation and developing advanced technological solutions to build strong safeguards against the potential negative impacts of AI.

Singapore is also adopting a light-touch regulatory approach to AI in the highly regulated health care sector, focusing on expanding use cases to guide AI adoption that demonstrate the effectiveness and safety of AI technologies and solutions in real-world health care settings. Companies looking to position themselves as pivotal contributors to Singapore’s AI-driven health care transformation should look to engage with the government through pilot programs and proof-of-concept partnerships.

We will continue to keep you updated on developments in Singapore as they occur. If you have any comments or questions, please contact BGA Singapore Managing Director Nydia Ngiow at nngiow@bowergroupasia.com.

Best regards,

BGA Singapore Team