The Ministry of Trade and Industry (MTI) has cut Singapore's 2025 growth forecast to 0% to 2% ahead of the tariff war between the U.S. and China, while some economists warned of the possibility of a technical recession in 2025.
MTI's new forecast announced on April 14 is a reduction from the previous 1% to 3%. Singapore's economy is expected to grow by 4.4% in 2024.
On the same day, the Monetary Authority of Singapore continued to slow the appreciation of the local currency against the trade-weighted index to respond to reducing inflation and rising risks to economic growth.
MTI also stated that Singapore's economy grew by 3.8 percent year-on-year in the first quarter of 2025, according to preliminary estimates. This figure is slower than the 5 percent growth in Q4 2024 and some market forecasts.
On a seasonally adjusted quarterly basis, the economy contracted by 0.8 percent, reversing from a growth of 0.5 percent in Q4 2024.
Analysts surveyed by Bloomberg expect a year-on-year growth of 4.5% and a quarterly decline of 0.4%.
MTI stated that they will continue to closely monitor domestic and global developments and will further adjust the new forecasts if necessary.
In the minister's statement on U.S. tariffs on April 8, Prime Minister and Finance Minister Lawrence Wong stated that Singapore may or may not fall into recession in 2025, but its growth would be significantly affected.
On April 9, U.S. President Donald Trump announced a 90-day suspension of tariffs, except for tariffs on China, which are currently at a staggering 145 percent. In retaliation, China raised tariffs on U.S. goods to 125 percent, effective April 12.
Singapore still faces a fixed tariff rate of 10 percent that Trump applied to goods from all foreign countries, effective April 5.
The Trump administration later excluded electronics such as smartphones and laptops from reciprocal tariffs, meaning they would not be subject to the 145 percent tariff applied to China.
But hours later, they announced that they fell under the semiconductor import tariff and would be subject to a separate import tax.
MTI warned that the tariff war poses 'significant downside risks' to the global economy. MTI stated that the increase in uncertainty could lead to a larger-than-expected decline in economic activity as businesses and households adopt a 'wait-and-see approach' before making spending decisions.
Retaliatory tariff moves could lead to a global trade war, disrupting global supply chains, increasing costs, and resulting in a much more severe global economic recession.
The process of global deflation could also be disrupted, and the risk of recession could rise in both advanced and emerging markets, leading to unstable capital flows that could create potential vulnerabilities in the banking and financial system.
Mr. Song Seng Wun, an economic advisor at CGS International, said Singapore faces the risk of a technical recession due to 'many uncertainties surrounding the trajectory of economic growth.'
Technical recession is defined as two consecutive quarters of declining Gross Domestic Product (GDP).
Mr. Song stated, 'Although not ideal, this is a more favorable outcome compared to a prolonged recession.'
Ms. Selena Ling, Chief Economist and Director of Global Market Research and Strategy at OCBC Bank, stated, 'There are still no clear signs of a bottom.'
She stated, 'A technical recession could occur as the impact of the initial U.S. tariff announcements caused significant disruption to financial markets in April and is expected to have real economic consequences in the coming months.'
In the second half of 2025, Ms. Ling stated that the Singapore economy is likely to decline further from the high baseline seen in the second half of 2024, when growth was 5.7 percent year-on-year in Q3 and 5 percent in Q4. She indicated that this would bring her full-year 2025 growth forecast closer to 1.6 percent, assuming the 10 percent tariff on Singapore remains intact.
Brian Lee, an economist at Maybank, maintained his 2025 GDP growth forecast at 2.1%, slightly higher than the new forecast from MTI.
He stated, 'We are expecting growth to slow down, but not a recession at this stage.'
He stated that the U.S. suspension of tariffs on most countries, as well as the redirection of trade and financial flows, could ease the impact on Singapore's economy.
Mr. Lee stated that domestically, lower interest rates, a construction boom, and more financial support will also help support growth.
He also noted that growth in the manufacturing sector was stronger than expected at 5% in the first quarter of 2025, although it slowed from a growth of 7.4% in Q4 2024.
This indicates that activity took place earlier in March against the backdrop of a rush to produce and ship orders ahead of the U.S. retaliatory tariff announcement on April 2.
MTI's data indicates that the construction sector grew by 4.6 percent, extending the growth of 4.4 percent in the previous quarter.
Among the service sectors, wholesale and retail, as well as transport and storage, reported a combined growth of 4.2%, down from a growth of 5.6% in the previous quarter.
Every sector in the group, except retail, experienced growth in the quarter.
Growth in the information and communication, finance and insurance, and professional services sectors decreased to 3 percent.
Singapore's finance and insurance sector expanded due to strong banking activity and related activities primarily involving payment companies.
Growth in the remaining service sectors, including accommodation and food services, real estate, and administrative and support services, remained unchanged from the previous quarter at 2.5 percent.
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