SINGAPORE: The government is keeping Singapore’s economic growth forecast for 2025 at 0% to 2%, though it says 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 Beh Swan Gin, permanent secretary at the Trade and Industry Ministry (MTI), following the release of the latest quarterly economic survey report on May 22.
Singapore’s economy grew 3.9% year-on-year (y-o-y) in the first quarter of 2025 (1Q25), a tad higher than an earlier estimate of 3.8% made in April, but weaker than the 5% growth in 4Q24.
On a quarter-on-quarter seasonally adjusted basis, the economy contracted by 0.6%.
This was a reversal from the 0.5% expansion in 4Q24.
The 1Q25 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 United States.
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 United States and China.
In April, MTI cut its gross domestic product growth forecast for 2025 from 1% to 3% following the sweeping tariffs announced by the United States and the ensuing cycle of tit-for-tat tariffs between the United States and China.
Since then, tensions have eased, with the United States 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 Singapore’s external demand outlook for the rest of the year has improved slightly compared with in April, as a result.
But Beh said the risks are still tilted to the downside.
These include a larger-than-expected pullback in economic activity, a 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.
He 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 y-o-y numbers. — The Straits Times/ANN
