Economists see Singapore economy slowing to 2.6% in 2025 from 3.6% in 2024: MAS survey
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Inflation in Singapore is seen easing further in 2025 in the survey.
ST PHOTO: KUA CHEE SIONG
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SINGAPORE - Private-sector economists see Singapore’s economy expanding by 2.6 per cent in 2025, with geopolitical tensions, including from higher tariffs, topping downside risks.
It will be a slowdown from the 3.6 per cent growth they now expect in 2024, according to a quarterly survey of professional forecasters by the Monetary Authority of Singapore (MAS) released on Dec 11.
Both the 2025 and 2024 forecasts are still higher than what the economists had predicted in the September survey. They had projected gross domestic product (GDP) to expand by 2.5 per cent in 2025 and 2.6 per cent in 2024.
In November, the Ministry of Trade and Industry (MTI) upgraded its 2024 growth outlook to “around 3.5 per cent” – up from an earlier forecast of 2 per cent to 3 per cent.
At the same time, MTI said it expected economic growth to slow to 1 per cent to 3 per cent in 2025.
MTI’s 2025 estimate was based mainly on cyclical moderation of GDP growth in the US economy that has been growing much faster than its developed market peers.
China’s economy was also likely to slow down on weaker exports, the ministry said.
MTI had also flagged the risk of higher uncertainty over US economic policies after the election of Donald Trump in the November polls.
In the latest MAS survey, the most probable outcome for 2025 growth fell between 2.5 per cent and 2.9 per cent, similar to the previous survey.
However, the average probability assigned to this range rose to 36 per cent, from 33 per cent in the September survey.
Geopolitical tensions was cited as the top downside risk by 100 per cent of respondents, from 66.7 per cent in the September survey.
US President-elect Trump has vowed to raise tariffs
Mr Chua Han Teng, an economist at DBS Bank, said: “It was unsurprising that geopolitical tensions featured as the most cited downside growth risk to Singapore’s highly trade-dependent economy, following the election of Donald Trump.”
He said trade policy uncertainty was already on the rise before the US elections in November, and will continue elevated with Trump 2.0 promising a wider trade war.
“We therefore also assess significant downside risks to Singapore’s economic growth from the potential effects of higher tariffs and elevated policy uncertainty, especially if global economic growth and trade slow discernibly, as they did in 2019 under Trump 1.0,” Mr Chua said.
The MAS survey also flagged risks of weaker growth in China and domestic cost pressures that may put a drag on Singapore’s economy.
For upside risks to Singapore’s outlook, better-than-expected growth environment was cited as the top factor by 64 per cent of respondents. This was followed by more robust growth in China and a sustained tech cycle upturn.
Inflation in Singapore is seen easing further in 2025 in the survey.
For 2025, overall inflation is seen falling to 1.9 per cent from 2.5 per cent in 2024, while core inflation – which excludes private transport and accommodation costs – is forecast to drop to 1.8 per cent from 2.8 per cent in 2024.
While the survey showed most economists continue to expect MAS’ stance to remain unchanged in the upcoming monetary policy reviews, some economists do expect the central bank to signal an easing.
Most central banks use interest rates to manage their monetary policy, which is aimed at managing inflation. MAS, however, uses the exchange rate for the same purpose as the bulk of inflation in Singapore is driven by prices of imported goods and services.
MAS does not directly set the precise level of the exchange rate; instead, it manages the value of the Singapore dollar within a policy band against a basket of currencies of its trade partners – referred to as the Singapore dollar nominal effective exchange rate (S$Neer).
In the latest survey, 33 per cent of the respondents expect MAS to reduce the slope of the S$Neer policy band in the next review due in January. The slope represents the change in the pace of S$Neer appreciation over time.
A reduced pace would mean slower appreciation.
About 11 per cent of respondents anticipate a lower level at which the S$Neer is centred.
MAS can strengthen or weaken the S$Neer immediately by shifting the midpoint of the policy band. A lower midpoint would mean slower appreciation.
As for the jobs market, Singapore’s overall unemployment rate is expected to stand at 2 per cent at the end of 2024, down from the previous forecast of 2.1 per cent.
