Singapore's economic outlook amid global uncertainty

[SINGAPORE] The Singapore government is holding firm on its economic growth forecast for 2025 at a range of 0% to 2%, even as it notes a modest improvement in the global demand environment, buoyed by recent tariff truces that have eased trade tensions worldwide.

"Despite these encouraging signs, the global economic outlook remains fraught with uncertainty, with risks still skewed to the downside," said Beh Swan Gin, Permanent Secretary at the Ministry of Trade and Industry (MTI), during the release of Singapore’s latest quarterly economic survey on May 22.

The economy expanded by 3.9% year-on-year in the first quarter of 2025 (1Q25), slightly above the preliminary estimate of 3.8% made in April, but down from the 5% growth recorded in the final quarter of 2024. However, on a quarter-on-quarter seasonally adjusted basis, GDP contracted by 0.6%—a reversal from the 0.5% expansion seen in the previous quarter.

This contraction is attributed to weaker global demand and more cautious consumer spending patterns. Despite marginal improvements in external demand, the export-reliant economy continues to face headwinds from global economic uncertainties.

Growth in 1Q25 was led by the wholesale trade, manufacturing, and finance and insurance sectors. These gains were partially driven by front-loading activities in anticipation of possible U.S. tariff hikes. On the other hand, the accommodation and food and beverage sectors saw contractions, underscoring persistent challenges in the tourism and hospitality industries amid shifting travel trends and global economic fluctuations.

The MTI said its decision to maintain the April growth forecast range reflects both the economy's performance in the first quarter and the recent de-escalation in trade tensions—particularly between the U.S. and China.

Last month, the ministry revised its 2025 GDP growth forecast down from 1%–3%, citing sweeping U.S. tariff announcements and retaliatory measures from China. Since then, both nations have agreed to a 90-day tariff truce while negotiations continue, offering a reprieve to global markets.

China’s economic outlook has also improved, thanks to a substantial stimulus package recently unveiled by Beijing. These developments have prompted MTI to slightly upgrade its assessment of Singapore’s external demand prospects for the rest of the year.

Nevertheless, officials caution that these improvements remain fragile. Economists and policymakers are closely monitoring the U.S.-China trade talks, with concerns that any breakdown could swiftly reverse recent gains.

Beh reiterated that the balance of risks remains tilted to the downside. He flagged several concerns, including a sharper-than-expected global slowdown, a potential re-escalation of trade conflicts, and macroeconomic risks like global disinflation and the threat of recession-induced capital flow volatility.

While not ruling out a technical recession—defined as two straight quarters of negative growth—Beh clarified that this would not necessarily indicate a full-year economic downturn, which would be based on year-on-year figures.

In response to these evolving risks, the government is expected to keep a close watch on global developments and could introduce further policy measures to safeguard growth and stability. Potential strategies may include fiscal stimulus, targeted aid for vulnerable sectors, and broader efforts to strengthen the economy through innovation and diversification.