Singapore economy grows 4.4% in 2024, but growth seen slowing to 1% to 3% in 2025

SINGAPORE - Singapore’s economy will slow in 2025 after a stronger-than-expected performance in 2024 as global uncertainties and barriers to trade intensify, though the slower growth is not expected to have an immediate impact on jobs and wage growth.

The economy expanded at a faster pace of 4.4 per cent in 2024 compared with an earlier estimate of 4 per cent, the Ministry of Trade and Industry (MTI) on Feb 14 said in its economic survey for the year.

This came as the economy grew 5 per cent year on year in the fourth quarter of 2024, higher than the initial estimate of 4.3 per cent.

However, MTI kept unchanged its slower growth forecast for 2025 at the 1 per cent to 3 per cent range, flagging downside risk from a further escalation of geopolitical conflicts and higher uncertainty over US trade policies under President Donald Trump.

Anaemic growth spread over several quarters is usually indicative of a depressed business environment and could hit job and wage growth. However, MTI permanent secretary Beh Swan Gin said a major impact on employment growth is not expected as yet, in response to a question from The Straits Times at a briefing on Feb 14.

“So far, the vacancy rates, unemployment levels and retrenchment levels have all been very stable, so we do not see any cause for concern at this point,” he said, adding that MTI will monitor the situation closely.

The overall unemployment rate in Singapore was 2 per cent in 2024, compared with 1.9 per cent in 2023. Meanwhile, real median income, which excludes inflation, rose 3.4 per cent in 2024.

MTI said: “Uncertainties in the global economy remain significant, with the risks tilted to the downside.

“There is a large cone of uncertainty surrounding the outlook of the US economy, with its trajectory depending on the policies of the new US administration,” it added.

In his latest trade salvo, Mr Trump on Feb 13 directed officials to plan

reciprocal tariffs on all levies on US imports

, subject to a study due for completion by April 1. He has also raised tariffs on US imports from China by 10 per cent and levied a 25 per cent tax on all steel and aluminium imports.

However, according to the US International Trade Administration, its exports to Singapore, because of the free trade agreement between the two countries, do not attract any duties, with very few exceptions.

Alcoholic beverages are not exempt for social reasons. Singapore also imposes excise duties on motor vehicles, tobacco products, and certain petroleum products due to environmental concerns, for all imports, not just from the US.

DBS Bank economist Chua Han Teng said that even though Singapore is expected to avoid direct tariffs from the US, it remains indirectly vulnerable as potential US tariffs on its major trading partners could result in deceleration of global economic growth and trade.

“Escalating global trade tensions pose the biggest downside risk to our full-year outlook,” he said.  

MTI said that ongoing trade frictions among major economies, alongside lingering risks of escalation in geopolitical conflicts, could lead to higher production costs. Greater global economic policy uncertainty could in turn dampen global investment and trade and weigh on global growth.

Enterprise Singapore in its trade review report, also released on Feb 14, said non-oil domestic export (Nodx) is expected to grow by 1 per cent to 3 per cent in 2025, in line with the World Trade Organisation’s projections of faster merchandise trade growth in 2025 than in 2024.

However, the agency added that significant uncertainties in the global economy could weigh on global growth and pose downside risks to its Nodx forecast.

MTI in its report also highlighted the risk of inflation remaining elevated for longer than earlier expected.

This could lead to tighter financial conditions, and potentially trigger latent vulnerabilities in banking and financial systems.

However, Dr Beh said projecting growth at the start of a year is always difficult and is more so now given the uncertainty of which measures Mr Trump would prioritise.

“There are several policy moves the US administration may introduce... and some may actually be positive for growth,” he said, referring to a possible cut in US corporate tax rates, which would benefit the US economy, and by extension Singapore.

“More broadly, any impact on the growth rates of our major trading partners will have an impact on Singapore,” said Dr Beh, responding to a question about the impact of US tariffs announced so far.

MTI said manufacturing and trade-related services sectors in Singapore are expected to continue to expand in 2025, although their pace of growth is likely to moderate from 2024 levels.

Within the manufacturing sector, the electronics cluster is projected to expand at a steady pace, supported by robust demand for semiconductor chips in the computer, smartphone and data centre end-markets.

This will have positive spillover effects on the precision engineering cluster and the machinery, equipment and supplies segment of the wholesale trade sector. At the same time, strong order books in the aerospace and marine and offshore engineering segments should drive growth in the transport engineering cluster.

The manufacturing sector expanded by 7.4 per cent year on year in the fourth quarter of 2024, extending the 11.2 per cent growth in the previous quarter.

The strong performance of the sector, according to MTI, was driven by output gains in the electronics, transport engineering and general manufacturing clusters.

However, on a quarter-on-quarter seasonally adjusted basis, the sector posted flat growth of zero per cent, slowing from the 11.7 per cent expansion in the preceding quarter. For 2024 as a whole, the manufacturing sector expanded by 4.3 per cent, a turnaround from the 4.2 per cent contraction in 2023. 

MTI said the outward-oriented services sectors such as information and communications and finance and insurance are projected to register healthy growth. On the other hand, growth in the retail trade and food and beverage services sectors is likely to remain lacklustre, weighed down in part by locals shifting their spending overseas.

In the fourth quarter, growth in the information and communications sector came in at 4.2 per cent year on year, slightly faster than the 4 per cent expansion in the third quarter. For 2024 as a whole, the sector grew by 5 per cent, slowing from the 11.2 per cent expansion in 2023.

The finance and insurance sector expanded by 6.1 per cent year on year in the fourth quarter, extending the 5.6 per cent expansion in the previous quarter. For the whole of 2024, the sector grew by 6.8 per cent, picking up from the 3.1 per cent expansion in 2023.