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Singaporeans’ Recession Fears Trigger Shift to Savings, Investments
As global economic uncertainty persists, Singaporeans are increasingly prioritizing savings and strategic investments to safeguard their financial futures. Several key trends and recent data underscore this shift, revealing how Singaporeans are adapting to potential economic headwinds. Concerns about a possible recession, while somewhat tempered compared to previous years, continue to influence financial decisions, driving a focus on long-term financial security.
Increased Savings Rate
Singapore has long maintained a high savings rate, and recent data indicates this trend is strengthening. The personal saving rate in Singapore reached 35.3% in December 2024, an increase from 33.5% in September 2024 [6]. This elevated savings rate reflects a cautious approach to spending amidst economic uncertainty, with individuals choosing to bolster their financial reserves. The gross savings rate was measured at 47.5% in December 2024 [2]. This is updated yearly, with the average rate being 47.5% [2].
Retirement Planning Takes Center Stage
Concerns about retirement adequacy are also driving increased savings and investment activity. A report from Etiqa Insurance Singapore indicated that 75% of Singaporeans prioritize retirement planning, typically starting around age 35 [18]. Confidence in achieving retirement goals remains high, with 69% of Singaporeans expressing confidence, particularly among millennials (75%) [18]. However, Fidelity International’s Asia Pacific Investor Study highlights a gap, noting that only 41% of Singapore investors have started planning for retirement, emphasizing the need for earlier and more comprehensive planning [22]. Moreover, 70.5% of members turning 55 in 2024 met their cohort’s Required Retirement Sum, up from 67.6% in 2023, showcasing improved retirement preparedness [9].
Investment Trends in Singapore
Singaporeans are also exploring various investment avenues to grow their wealth. While traditional preferences for low-risk financial instruments like savings accounts (61%) and CPF contributions (56%) persist, younger Singaporeans are increasingly interested in building investment portfolios [18].
- Equity Investment: Despite a subdued performance in 2023, the Singapore equity market showed strong double-digit gains of 21.7% in 2024 [4, 10]. Sectors like technology, services, and energy transition are seen as bright spots, with corporate earnings expected to continue expanding [4].
- REITs: Real Estate Investment Trusts (REITs) faced challenges in 2024 due to concerns about inflation and rising interest rates [10]. However, some REITs with strong balance sheets and exposure to key themes may offer opportunities, especially as interest rates are expected to ease [4, 10].
- Singapore Savings Bonds (SSBs): SSBs remain a popular choice for risk-averse investors, offering a secure, government-backed investment option with flexible redemption terms [24, 33]. The 10-year average return for SSBs has fluctuated, with recent rates around 2.29% annually [29].
Impact of Inflation and Economic Outlook
Inflation remains a key concern for Singaporeans. Core inflation averaged 2.7% for the whole of 2024, down from 4.2% in 2023 [3]. While inflation is projected to fall further in 2025, rising costs continue to influence financial habits [3, 5]. The Monetary Authority of Singapore (MAS) expects Singapore’s 2024 GDP growth to be on the stronger side of the 2%-3% range [35]. However, global uncertainties and potential trade wars are expected to keep the investment environment challenging [13].
Shifts in Investor Behavior
The number of Singaporeans engaging in online trading has decreased, with 248,000 placing online trades in the past 12 months, down from 264,000 in September 2023 [8]. This contraction marks the third consecutive year, with active trader numbers returning to 2018 levels [8]. However, client satisfaction is at an all-time high, driven by demands for live pricing, enhanced security, and risk management tools [8].
- Education Drives Engagement: Nearly half of investors access educational content daily, and 21% rate their investing knowledge as proficient [8]. This underscores the importance of continuous learning and informed decision-making.
Foreign Direct Investment
Singapore continues to attract significant foreign direct investment (FDI), with inflows reaching $192 billion in 2024, a 5.6% increase over the previous year [12]. The finance and insurance sector accounted for the largest share (60.4%) of these inflows, with the United States, the United Kingdom, Japan, Mainland China, and Ireland being the top source economies [12]. Fixed asset investments also increased, with Singapore drawing $13.5 billion in commitments in 2024, expected to create 18,700 jobs [13]. The electronics sector led these investments, driven by trends in AI and digitalisation [13].
Wealth Management and Family Offices
Singapore’s private wealth sector is thriving, and is expected to grow by 9.7% from 2024 to 2028 [34]. The number of family offices in Singapore has surged, reaching over 2,500 by the end of 2024 [34]. These offices are drawn to Singapore’s political stability, tax incentives, and financial infrastructure [34]. Singapore is also proactively shaping the future standards of global wealth accumulation, benefiting investors and businesses alike [34].
- ESG and Sustainable Investing: Banks like OCBC and UOB have launched dedicated ESG funds, with assets under management growing 60% year-over-year since 2024 [34].
- Digital Transformation: Wealth management firms in Singapore have significantly accelerated their digital investments, with DBS Bank implementing AI-driven advisory platforms [34].
Strategies for Singaporeans
Amidst these trends, Singaporeans are encouraged to adopt proactive strategies for financial planning:
- Embrace Early Planning: Given the increasing life expectancy and rising costs of living, starting retirement planning early is essential [22].
- Diversify Investments: Explore a mix of low-risk and growth-oriented investments to balance security and potential returns [30].
- Enhance Financial Literacy: Engage with educational resources and seek professional advice to make informed investment decisions [8].
- Consider CPF Top-Ups: Leverage the power of compound interest by topping up CPF accounts to maximize long-term savings [24].
- Stay Informed: Keep abreast of economic developments and adjust financial strategies accordingly [35].
By staying informed and proactive, Singaporeans can navigate economic uncertainties and secure their long term investment and financial well-being.
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