Singapore’s economy sees surprise expansion in Q2 despite US tariff uncertainty: Advance estimate

SINGAPORE - Singapore’s economy continued to grow in the second quarter of 2025, skirting a technical recession despite persistent global trade headwinds and US tariff uncertainty weighing on the export-reliant economy.

The better-than-expected performance has prompted some economists to raise their growth forecast for 2025 to beyond the official range of zero per cent to 2 per cent.

A technical recession is defined as two consecutive quarters of negative growth, unlike a full-blown economic recession, which takes into account year-on-year performance.

Based on advance estimates by the Ministry of Trade and Industry (MTI), the economy grew 4.3 per cent year on year in the second quarter of 2025, extending the 4.1 per cent growth in the previous quarter. 

Analysts’ consensus estimate by Reuters was for 3.5 per cent growth in the second quarter.

On a quarter-on-quarter seasonally adjusted basis, the economy expanded by 1.4 per cent, a turnaround from the 0.5 per cent contraction in the first quarter of 2025, MTI said on July 14.

Gross domestic product growth for the first quarter was revised up to 4.1 per cent, from the earlier estimate of 3.9 per cent. 

For the first half of 2025, Singapore’s GDP growth averaged 4.2 per cent year on year.

“Looking forward, there remain significant uncertainty and downside risks in the global economy in the second half of 2025 given the lack of clarity over the tariff policies of the US,” MTI said in a statement.

The latest figures come as Singapore grapples with fragile external demand as the US intensifies its trade war with major trading partners.

Singapore, where external trade is three to four times its GDP, was hit with a 10 per cent tariff rate despite the US enjoying a goods trade surplus of US$2.8 billion (S$3.6 billion) with the Republic in 2024.

Over the weekend, US President Donald Trump threatened to impose a 30 per cent tariff on imports from Mexico and the European Union starting on Aug 1, after weeks of negotiations with the major trading partners failed to reach a comprehensive trade deal.

Mr Trump sent similar letters to 23 other trading partners, including Canada, Japan and Brazil, setting blanket tariff rates ranging from 20 per cent up to 50 per cent, as well as a 50 per cent tariff on copper. The 50 per cent levies on steel and aluminium imports and a 25 per cent tariff on auto imports would remain.

The US President’s Aug 1 deadline gives the targeted countries time to negotiate agreements that could lower the threatened tariffs.

Singapore’s better-than-expected performance was lifted as manufacturing companies rush their purchases and shipments ahead of the US tariffs, said Ms Selena Ling, chief economist and head of global markets research and strategy at OCBC.

The Republic’s manufacturing sector grew by 5.5 per cent year on year in the second quarter of 2025, faster than the 4.4 per cent expansion in the previous quarter. Growth was driven by output expansions across all clusters, except for the chemicals and general manufacturing clusters.

The construction sector expanded 4.9 per cent year on year in the second quarter, easing slightly from the 5.1 per cent growth in the preceding quarter.

Among the services sectors, the wholesale and retail trade as well as transportation and storage sectors collectively grew by 4.8 per cent year on year in the second quarter. This compares with the 4.6 per cent growth in the previous quarter. All sectors within the group expanded during the quarter.

Growth in the transportation and storage sector was mainly driven by the water transport segment, while that in the wholesale trade sector was led by the machinery, equipment and supplies segment.

The retail trade sector expanded on account of higher sales volumes in both the motor vehicle and non-motor vehicle segments.

The information and communications, finance and insurance as well as professional services sectors expanded by 3.8 per cent year on year in the second quarter, following the 3.7 per cent growth in the previous quarter.

Growth in the finance and insurance sector was largely driven by banking activities, as well as activities auxiliary to financial activities.

On a quarter-on-quarter seasonally adjusted basis, the information and communications, finance and insurance as well as professional services sectors grew by 1.3 per cent, a turnaround from the 4.4 per cent contraction in the first quarter.

The combined growth of several services sectors – including accommodation and food services, real estate, administrative and support services, and other services – was 3.4 per cent year on year in the second quarter.

This was faster than the 2.3 per cent growth in the previous quarter, underpinned by the growth in the accommodation sector as more international visitors arrived compared with the previous year.

The better-than-expected performance in the first half of 2025 has prompted Ms Ling to upgrade her growth forecast for Singapore to 2.1 per cent in 2025, from 1.6 per cent previously. This is higher than MTI’s growth forecast of zero per cent to 2 per cent following the sweeping tariffs announced by the US in April.

Maybank upgraded its 2025 GDP growth forecast to 3.2 per cent from 2.4 per cent.

Maybank economist Chua Hak Bin expects MTI to upgrade its forecast range to 2 per cent to 3 per cent from the current zero per cent to 2 per cent range when the final second-quarter data is released in August. He said Singapore faces a relatively low baseline reciprocal tariff rate, even if the rate is possibly raised to 20 per cent from 10 per cent.

“We expect some payback and modest slowdown in regional trade activities, but not a contraction in the second half. We expect the Monetary Authority of Singapore to maintain the current appreciation bias at the July meeting given the strength of the economy,” he said.

Dr Chua noted that falling interest rates have underpinned growth in the construction sector as well as supported the property market and financial activities. 

DBS economist Chua Han Teng is leaving his 2025 forecast intact at 2 per cent as trade uncertainties remain elevated, casting a shadow over global economic growth prospects. 

Ms Sheana Yue, an economist at Oxford Economics, also doubts Singapore’s economy will remain resilient in the second half, with US trade policy posing the biggest challenge.

“Singapore’s trade-dependent economy isn’t insulated from the indirect effects of higher global tariffs. A particular challenge may arise from the focus on trans-shipment – Singapore’s re-exporting sector accounts for roughly two-thirds of all trade,” Ms Yue said.