But increases in interest rates have made financing loans more expensive and this has drastically increased the costs of building new homes. Rising building costs and a limited supply of new housing due to building restrictions during the pandemic have led to spikes in the costs of new homes and rental prices.

Skyrocketing home prices and rents were further fuelled by surging demand due to the opening of the economy and the return of foreign human capital to Singapore. As we head into 2024, the increase in housing supply is easing bottlenecks, stabilizing rental prices and slowing price increases for new homes.

The financial sector had also been dealing with an ongoing anti-money laundering operation that has led to 10 arrests and uncovered more than $2.8 billion Singapore dollars ($2.1 billion) in assets and cash linked to gambling syndicates overseas.

Going forward, financial regulators will be tightening measures to curb the flow of illicit funds in the city-state, while also mitigating the rise of financial cyber fraud.

On a brighter note, having a first-mover advantage opening its borders post Covid-19, Singapore is benefitting from the resumption of air travel, tourism and related activities.

In 2023, international visitor arrivals are expected to reach 12 to 14 million, two-thirds to three-quarters of their 2019 level. By the end of 2023, travel and tourism revenue is projected to reach $3.27 billion.

But the risk of escalation in the wars in Ukraine and the Middle East as well as geopolitical tensions between China and the United States could disrupt travel plans and global supply chains, causing steep increases in energy and commodity prices. Given Singapore's role as a regional transport and logistics hub, it would be severely impacted.

In line with global trends, inflation remained elevated for Singapore in the first half of 2023, but there was
some easing by June.
But
core inflation , which is a better gauge of the price increases most Singapore households face, is expected to edge up in the first quarter of 2024.

This reflects the GST hike due from 8-9% on January 1, 2024, as well as increases in the costs of water, electricity and public transport. To support higher living costs, the Ministry of Finance announced a S$1.1 billion ($825 million) Cost-of-Living Support Package on September 28, 2023.

Singapore's economy experienced an unexpected expansion in the second quarter of 2023 and successfully averted a looming technical recession. According to the Ministry of Trade and Industry, Singapore's GDP rose by 0.7% on a year-on-year basis in the second quarter of 2023.

On a quarter-on-quarter seasonally adjusted basis, the economy expanded by 0.3%, reflecting a turnaround from the 0.4% contraction in the first quarter of 2023.

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The accommodation industry saw robust growth due to the recovery in international visitor arrivals. Singapore's event-hosting profile was boosted by the yearly Formula 1 Grand Prix and Music Festival.

Economic relations between Singapore and Malaysia also received a boost when both countries signed bilateral agreements to deepen cooperation in the digital economy, green economy and cybersecurity during Malaysian Prime Minister Anwar Ibrahim's visit to Singapore in January 2023.

Later in the year at the 10th Singapore–Malaysia Leaders' Retreat, both leaders highlighted plans to accelerate cross-border economic relations through the creation of the Johor–Singapore special economic zone.

The Singapore economy avoided an outright recession as the services sector and travel industry offset the slump in manufacturing and the weaker financial sector with above-trend growth after the end of Covid-19 curbs.

Faizal Bin Yahya is Senior Research Fellow in the Institute of Policy Studies at the Lee Kuan Yew School of Public Policy, National University of Singapore.

This article was originally published by East Asia Forum and is republished under a Creative Commons license.