SINGAPORE: Singapore has maintained its growth forecast for the year at a range of 0 to 2 per cent, even as data on Thursday (May 22) showed the economy grew slightly faster than expected in the first quarter of 2025.
The economy grew by 3.9 per cent on a year-on-year basis in the first quarter, just above the government’s advance estimates of 3.8 per cent. Still, this is a slowdown from a 5 per cent growth in the fourth quarter of 2024.
In its press release, the Ministry of Trade and Industry (MTI) said first-quarter gross domestic product (GDP) growth was largely driven by the wholesale trade, manufacturing, as well as finance and insurance sectors.
In particular, growth in the manufacturing and wholesale trade sectors were likely to have been partly supported by front-loading activities ahead of anticipated tariff hikes by the United States.
On a quarter-on-quarter seasonally adjusted basis, the Singapore economy contracted by 0.6 per cent, better than the prediction of a 0.8 per cent contraction, but reversing from a 0.5 per cent growth in the previous quarter.
The government had in April downgraded Singapore’s GDP growth forecast on the back of a “significant deterioration” in the country’s external demand outlook due to the sweeping tariffs announced by US President Donald Trump.
Since then, the US and several economies have embarked on trade negotiations. Notably, the US and China have agreed to reduce the tariffs imposed on each other for 90 days while they negotiate a trade deal, MTI said.
“Given the steps taken by major economies to de-escalate global trade tensions, MTI’s assessment is that Singapore’s external demand outlook for the rest of the year has improved slightly compared to April,” it said.
In the US, for example, GDP growth is likely to come in slightly better than projected in April given the 90-day truce in the trade war with China, although growth is still expected to slow for the rest of 2025.
Still, MTI cautioned that the global economic outlook “remains clouded by significant uncertainty”.
This includes elevated economic uncertainty which may lead to a larger-than-expected pullback in economic activity as businesses and households adopt a “wait-and-see” approach before making spending decisions.
There is also the risk of a re-escalation in tariff actions, including retaliatory tariffs, that could lead to a full-blown global trade war, it warned.
Against this backdrop, the growth of outward-oriented sectors in Singapore is expected to slow over the course of the year.
US' tariff measures are likely to "adversely affect" the manufacturing sector given its export exposure to the US market, as well as slowing growth in global end-markets. That said, the transport engineering cluster within the sector “remains a bright spot”, especially given the shift towards aircraft maintenance, repair and overhaul works.
MTI said the manufacturing sector’s slowdown, coupled with weaker global trade, will in turn weigh on the trade-related services sectors.
In the wholesale trade sector, sales volumes are expected to weaken as the boost from front-loading activities fades and global trade softens, especially in the second half of 2025.
The projected decline in global trade will similarly negatively affect the transportation and storage sector through a softer demand for shipping and air cargo services.
Meanwhile, growth in the finance and insurance sector could be weighed down by episodes of weaker trading activity, as well as more tepid business activity and lower consumer spending.
The information and communications and professional services sectors could also see muted growth if firms cut back on discretionary spending, such as IT and marketing.
Growth in the consumer-facing sectors, such as retail trade and food and beverage services, is likely to remain lacklustre as locals continue to spend abroad and the expected weakening of domestic labour market conditions.
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The economy grew by 3.9 per cent on a year-on-year basis in the first quarter, just above the government’s advance estimates of 3.8 per cent. Still, this is a slowdown from a 5 per cent growth in the fourth quarter of 2024.
In its press release, the Ministry of Trade and Industry (MTI) said first-quarter gross domestic product (GDP) growth was largely driven by the wholesale trade, manufacturing, as well as finance and insurance sectors.
In particular, growth in the manufacturing and wholesale trade sectors were likely to have been partly supported by front-loading activities ahead of anticipated tariff hikes by the United States.
On a quarter-on-quarter seasonally adjusted basis, the Singapore economy contracted by 0.6 per cent, better than the prediction of a 0.8 per cent contraction, but reversing from a 0.5 per cent growth in the previous quarter.
The government had in April downgraded Singapore’s GDP growth forecast on the back of a “significant deterioration” in the country’s external demand outlook due to the sweeping tariffs announced by US President Donald Trump.
Since then, the US and several economies have embarked on trade negotiations. Notably, the US and China have agreed to reduce the tariffs imposed on each other for 90 days while they negotiate a trade deal, MTI said.
“Given the steps taken by major economies to de-escalate global trade tensions, MTI’s assessment is that Singapore’s external demand outlook for the rest of the year has improved slightly compared to April,” it said.
In the US, for example, GDP growth is likely to come in slightly better than projected in April given the 90-day truce in the trade war with China, although growth is still expected to slow for the rest of 2025.
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Still, MTI cautioned that the global economic outlook “remains clouded by significant uncertainty”.
This includes elevated economic uncertainty which may lead to a larger-than-expected pullback in economic activity as businesses and households adopt a “wait-and-see” approach before making spending decisions.
There is also the risk of a re-escalation in tariff actions, including retaliatory tariffs, that could lead to a full-blown global trade war, it warned.
Against this backdrop, the growth of outward-oriented sectors in Singapore is expected to slow over the course of the year.
US' tariff measures are likely to "adversely affect" the manufacturing sector given its export exposure to the US market, as well as slowing growth in global end-markets. That said, the transport engineering cluster within the sector “remains a bright spot”, especially given the shift towards aircraft maintenance, repair and overhaul works.
MTI said the manufacturing sector’s slowdown, coupled with weaker global trade, will in turn weigh on the trade-related services sectors.
In the wholesale trade sector, sales volumes are expected to weaken as the boost from front-loading activities fades and global trade softens, especially in the second half of 2025.
The projected decline in global trade will similarly negatively affect the transportation and storage sector through a softer demand for shipping and air cargo services.
Meanwhile, growth in the finance and insurance sector could be weighed down by episodes of weaker trading activity, as well as more tepid business activity and lower consumer spending.
The information and communications and professional services sectors could also see muted growth if firms cut back on discretionary spending, such as IT and marketing.
Growth in the consumer-facing sectors, such as retail trade and food and beverage services, is likely to remain lacklustre as locals continue to spend abroad and the expected weakening of domestic labour market conditions.
Continue reading...