Singapore keeps 2025 growth forecast at 0% to 2%, though outlook ‘improved slightly’ from trade truces

SINGAPORE - The Government is

keeping Singapore’s economic growth forecast for 2025 at zero per cent to 2 per cent,

though it said the external demand outlook for the rest of the year has “improved slightly”, given the tariff truces that have de-escalated global trade tensions.

“Notwithstanding these positive developments, the global economic outlook remains clouded by significant uncertainty, with the risks tilted to the downside,” said Dr Beh Swan Gin, permanent secretary at the Ministry of Trade and Industry (MTI), following the release of the latest quarterly economic survey report on May 22.

Singapore’s economy grew 3.9 per cent year on year in the first quarter of 2025 – a tad higher than an earlier estimate of 3.8 per cent made in April, but weaker than the 5 per cent growth in the fourth quarter of 2024.

On a quarter-on-quarter seasonally adjusted basis, the economy contracted by 0.6 per cent. This was a reversal from the 0.5 per cent expansion in the fourth quarter of 2024.

First-quarter 2025 growth was mainly driven by the wholesale trade, manufacturing, and finance and insurance sectors, partly supported by front-loading activities ahead of anticipated tariff hikes by the US.

In contrast, the accommodation, and food and beverage services sectors contracted.

MTI said it has kept to its April forecast after taking into account the economy’s performance in the first quarter and the de-escalation in global trade tensions, in particular, between the US and China.

In April, MTI cut its gross domestic product (GDP) growth forecast for 2025 from 1 per cent to 3 per cent following sweeping tariffs announced by the US and the ensuing cycle of tit-for-tat tariffs between the US and China.

Since then, tensions have eased, with the

US and China agreeing to reduce the tariffs imposed

on each other for 90 days while they negotiate a trade deal. China’s growth prospects have also been lifted by the substantial package of support measures announced recently.

MTI’s assessment is that as a result, Singapore’s external demand outlook for the rest of the year has improved slightly compared with April.

But Dr Beh said the risks are still tilted to the downside. These include a larger-than-expected pullback in economic activity, potential re-escalation of trade retaliation leading to a full-blown trade war, and global disinflation process and recession risks leading to destabilising capital flows.

Dr Beh is not ruling out the possibility of a technical recession, defined as two consecutive quarters of negative growth, but said this does not equate to a full-blown economic recession which will be based on year-on-year numbers.

As to whether the Monetary Authority of Singapore could loosen its monetary policy further in July, its deputy managing director Edward Robinson said a comprehensive assessment will be made before any decision is taken, but the current policy stance remains appropriate “as of now”.

Dr Beh said US tariff measures are likely to adversely affect the growth of outward-oriented sectors in Singapore, in particular, the manufacturing sector, given its export exposure to the US market and slowing growth in global end-markets including the euro zone and China.

This, in turn, could weigh on trade-related services sectors such as wholesale trade, and transportation and storage.

Growth in the finance and insurance sector could be weighed down by episodes of weaker trading activity, with more tepid business activity and lower consumer spending.

Growth in consumer-facing sectors such as retail trade and food and beverage services is likely to remain lacklustre, weighed down by locals spending overseas and the expected weakening of domestic labour market conditions.

In the first quarter, seasonally adjusted unemployment rates edged up slightly for residents and citizens, despite a moderation in the number of retrenchments from the same period in 2024.

Total employment rose by 6,900 on a quarter-on-quarter basis, albeit at a slower pace compared with the gains in the fourth quarter.

Overall inflation in the first quarter eased to 1 per cent year on year, from 1.4 per cent in the fourth quarter of 2024.

Ms Selena Ling, OCBC’s chief economist and head of global markets research and strategy, is keeping her 2025 GDP growth forecast for Singapore at 1.6 per cent, given the softer global growth prospects and tariff-related uncertainties.

She said it remains uncertain if there would be a permanent deal after the 90-day tariff truce. She also noted that some damage to business and consumer confidence has already been done, and sectoral tariffs on items such as semiconductors and pharmaceuticals may still be on the cards. 

“A technical recession remains on the cards, with our forecast of a further deceleration in the second quarter of 2025 growth to 2.5 per cent year on year,” Ms Ling said. 

Mr Chua Han Teng, senior economist at DBS, expects growth to be softer in the second-half of 2025. He is keeping his 2025 growth forecast for Singapore at 2 per cent.

Ms Sheana Yue, economist at Oxford Economics, noted that while the final first-quarter GDP came in a touch stronger than the advance estimate, it still points to a broader picture of weakness. 

She noted that the economy contracted by its biggest clip since the Covid-19 pandemic hit in 2020, with weakness concentrated in government consumption and trade.

“We aren’t too concerned about the former since the Government managed to bring in a budget surplus in the last financial year and reserves remain strong. So, it has space to support the economy over the coming quarters if required. The latter is more worrying,” Ms Yue said.

Singapore’s exports are 170 per cent of GDP. US tariffs will hurt. The outlook for goods, which comprise around two-thirds of total exports, has dimmed significantly, Ms Yue added.

A boost to Singapore’s economy in the second quarter looks likely as US importers front-load orders during this tariff truce. Thereafter, however, exports are set to drop back, Ms Yue said.

“At the same time, lingering uncertainty will weigh heavily on businesses as future revenue streams from their investments are much less clear.

“The uncertainty will delay investment, hiring and other major spending decisions. Moreover, in Singapore’s case, exports drive investment decisions heavily,” she added.

Her forecast for Singapore’s GDP growth in 2025 is 1.6 per cent.