Singapore's cautious approach to economic forecast amid trade uncertainty

[SINGAPORE] Singapore is unlikely to revise its economic growth forecast upwards later this week, as recent signs of easing trade tensions have not dispelled the broader uncertainty weighing on the global outlook.

While developments such as the 90-day truce in the US-China tariff dispute announced on May 12 and a new US-UK trade agreement have somewhat allayed concerns over the health of global commerce—which is critical to Singapore’s export-driven economy—the temporary nature of these measures offers limited assurance. Core issues between Washington and Beijing remain unresolved, leaving a high risk of renewed tensions.

Deputy Prime Minister Gan Kim Yong, speaking on May 16, acknowledged some progress in trade discussions with the United States. He noted that although a 10 per cent baseline tariff on Singapore remains in place, there is cautious optimism that the country may be exempted from an upcoming sector-specific duty targeting pharmaceutical exports. Nonetheless, uncertainty over the trajectory of US trade policy continues to cast a long shadow over Singapore’s economic prospects, compounded by the unpredictable tone of US President Donald Trump’s trade rhetoric.

DPM Gan also highlighted that while semiconductor exports have yet to feature in current negotiations, Singapore plans to raise the issue in future discussions. Given the sector’s importance to the domestic economy, any tariffs on semiconductor goods could pose a serious threat to national growth. The potential imposition of such levies underlines the vulnerability of Singapore’s high-tech industries in an era of escalating global trade disputes.

Domestically, there have been pockets of resilience. Manufacturing output rebounded in March after a soft February, and non-oil domestic exports surged in April. However, these positive data points have not been sufficient to counter the prevailing global headwinds. The manufacturing sector, which constitutes a substantial share of GDP, continues to be hampered by sluggish external demand.

In light of these mixed signals, most economists expect the Ministry of Trade and Industry (MTI) to maintain its existing 2025 GDP growth forecast of 0 to 2 per cent when it releases its first-quarter economic survey on May 22. The conservative stance reflects the MTI’s earlier decision to downgrade its projection from a range of 1 to 3 per cent, citing deteriorating global demand conditions.

When asked about the possibility of an upward revision in the forecast, DPM Gan cautioned against premature optimism. “The 90-day deferment and the fact that the US and China are back at the negotiating table are encouraging developments, but it’s too early to draw any conclusions. The dominant theme in the global economy remains uncertainty,” he said.

Economists broadly support this prudent approach. DBS Bank senior economist Chua Han Teng noted that lingering ambiguity around US tariff policy is likely to dampen business investment, employment, and consumer sentiment. Similarly, OCBC Bank’s chief economist Selena Ling emphasized the need for caution, stating that it would be premature to alter the official forecast amid persistent volatility.

The current growth outlook, which has already been revised downward from earlier expectations of 1 to 3 per cent, stands in stark contrast to the 4.4 per cent GDP expansion recorded in 2024. The downgrade reflects the adverse impact of wide-ranging US tariffs and the ongoing US-China trade friction on Singapore’s external demand.