based on materials from the site - By Cryptopolitan_News
Singapore avoided a technical recession as its economy grew more than expected in the second quarter of 2025.
According to preliminary estimates from the Ministry of Trade and Industry (MTI) published on Monday, the economy of the city-state grew by 1.4% year-on-year on a seasonally adjusted basis, which corresponds to a decline of 0.5% in the previous quarter and exceeds economists' forecast of 0.8%.
GDP grew by 4.3% compared to the same period last year, surpassing the forecast of 3.6% obtained during a Bloomberg economist survey. This was largely made possible by the resilience of factories and the service sector, as producers rushed to fulfill export orders before the new US tariffs took effect on August 1.
Selena Ling, head of research and strategy at OCBC Bank, stated that the quarterly growth was likely driven by a 'pre-loading effect' as companies rushed to fulfill orders ahead of the implementation of higher tariffs. However, she warned that questions remain about how much momentum the economy may lose after the tariffs are introduced.
The Monetary Authority of Singapore (MAS) had already warned of the risk of a technical recession or two consecutive quarters of economic contraction. Data released on Monday helped to dispel these concerns, at least for the moment.
Construction and the services sector became the driving forces behind Singapore's economic recovery in the second quarter.
The rebound in the construction sector was another key factor in the recovery in the second quarter. Growth in this category for the quarter was 4.4%, which is a sharp turnaround from the decline rate of 1.8% in the first quarter. A significant part of this growth was due to the expansion of infrastructure projects in the public sector, which was bolstered to support the economy amid rising uncertainty in global trade.
The Ministry of Trade and Industry (MTI) also noted sustained high performance in the services sector, where growth was 4.8% year-on-year. This growth was partly attributed to 'pre-loading' in certain service-related sectors such as wholesale trade, finance, and logistics, where higher demand was observed before the tariffs expired.
Singapore's economy is extremely dependent on trade; its total trade volume is approximately three times its GDP, making it highly susceptible to global trade events. However, the short-term benefits from accelerated exports before the tariffs expire may not be sustained in the coming months.
'We are seeing a weakening of momentum in the second half of the year,' said Hong Go, head of Asian research at the Australia-New Zealand Banking Group (ANZ). However, he noted that given the significant growth driven by high GDP figures, most analysts are likely to believe that there will be no changes in monetary policy this month.
Economists warn of slowing growth in the second half of the year.
After higher-than-expected second-quarter figures, attention has shifted to the second half of 2025. The global economy remains caught in the grip of rising protectionism, weakening demand, and ongoing uncertainty regarding US trade policy. Analysts note high risks, and uncertainty in US trade policy is likely to undermine Singapore's economic growth in the coming months.
Nevertheless, Singapore has been less affected by the most severe punitive tariffs – the US imposed a 10% import tariff instead of 25%, as was the case with its ASEAN neighbors. However, any prolonged decline in global trade flows will have a ripple effect on the island's open economy.
MAS, which regulates monetary policy through exchange rates rather than interest rates, is likely to exercise caution. Analysts say the central bank will probably refrain from significant policy changes unless the global situation deteriorates significantly.
According to Tamara Mast Henderson, an economist at Bloomberg Economics for ASEAN countries, Singapore's economy faces a 'more challenging path' as the effects of the initial measures and new US tariffs weaken. She forecasts that the economy will grow by only 0.9% for the entire year, significantly lower than the growth rate of 4.4% in 2024.
In line with these rosy forecasts, the government has lowered its growth forecast for 2025 to a range of zero to 2%.
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