Economists stick to 2025 Singapore growth outlook, but warn of downside risks

PRIVATE-SECTOR economists largely kept to their 2025 growth forecasts for Singapore, after the fourth-quarter and full-year 2024 gross domestic product figures exceeded market expectations.

Yet they also warned of significant downside risks to the outlook, such as United States president-elect Donald Trump’s tariff plan and intensification of geopolitical tensions.

“Growth momentum in trade-related sectors – including manufacturing – should be sustained into early 2025, supported by the ongoing upturn in the electronics cycle, with tailwinds from some front-loading of exports and the attendant ramp-up of production ahead of Trump’s proposed tariffs on US imports,” said UOB associate economist Jester Koh.

But for the rest of 2025, the outlook remains clouded, he added. Downside risks could emanate from further protectionist measures under Trump’s “America First” policy, elevated geopolitical tensions, a possible peak in the electronics cycle, and uncertainty over the pace of monetary-policy easing by major central banks.

Concurring, OCBC chief economist Selena Ling noted that trade sentiment may remain on edge, as it is expected that Trump will enact wide-ranging and possibly punitive tariffs on trade with China and the rest of the world after he takes office later this month.

Singapore’s economy expanded 4 per cent year on year in 2024, supported by broad-based growth across the goods-producing and services sectors, showed advance estimates from the Ministry of Trade and Industry (MTI) on Thursday (Jan 2) morning.

This makes last year’s GDP growth better than the official forecast of “around 3.5 per cent” that MTI had narrowed to last November.

GDP growth in Q4 came in at 4.3 per cent, slower than the revised 5.4 per cent recorded in the third quarter. Economists polled by Bloomberg had guided for 3.8 per cent growth for Q4.

On a seasonally adjusted quarterly basis, the economy grew 0.1 per cent in Q4, moderating from the previous quarter’s revised 3.2 per cent expansion.

Outlook for the year

In 2025, MTI expects Singapore’s economy to grow by 1 to 3 per cent. DBS economist Chua Han Teng noted that the official forecast range “leaves some scope for much weaker growth, should global economic growth and trade slow discernibly, as they did in 2019 under (Trump’s first term)”.

“The medium-term challenges for highly trade-dependent economies like Singapore from a more protectionist global economic landscape are undoubtedly rising, even as the eventual global economic impact would depend on the roll-out sequence of the US administration’s policies,” he added.

Private-sector economists generally stuck to their forecasts, which fall within the official range.

UOB is expecting 2025 full-year growth to be 2.5 per cent, closer to the upper end of the forecast range.

“According to our estimates of the output gap... Singapore’s economic growth ran slightly above potential in 2024 and under our baseline scenario, growth momentum could slow in H2 FY25, resulting in a modest negative output gap for the full year,” said Koh.

Maybank economists Chua Hak Bin and Brian Lee also kept to their forecast of 2.6 per cent growth in 2025. “Easing monetary conditions, a generous election Budget, construction of major projects, and manufacturing front-loading in the first half will help cushion the uncertainty and shock from Trump’s global trade war,” they noted.

RHB analysts Barnabas Gan and Laalitha Raveenthar were more upbeat. They predict full-year growth of 3 per cent in 2025.

“We expect the country to experience resilient GDP growth, fuelled by a favourable global trade and investment environment,” they said. Singapore, as a key player in the global semiconductor supply chain, also stands to benefit from the positive outlook for the global tech cycle.

At least two economists adjusted their forecasts following MTI’s release. Barclays economist Brian Tan raised his forecast slightly to 2 per cent, from 1.8 per cent, while OCBC’s Ling slashed her forecast to 2.2 per cent, from 2.7 per cent.

Said Tan: “While GDP growth has indeed been surprising on the upside in the recent quarters, we remain wary of how elevated manufacturing output levels still look after the Q3 surge and expect further normalisation.

“This is especially so, given the next US administration is likely to significantly escalate global trade tensions – a particularly acute pain-point for ultra-open Singapore.”

Sectoral breakdown

In Q4, growth for the manufacturing sector decelerated to 4.2 per cent, from a jump of 11 per cent in the previous quarter. Growth in the sector was driven by output expansions in the electronics and transport engineering clusters, said MTI. For the full year, manufacturing grew 3.5 per cent.

Construction expanded 5.9 per cent in Q4, picking up pace from the previous quarter’s 4.7 per cent growth. This was due to an increase in public-sector construction output. For the whole of 2024, the sector expanded 4.8 per cent.

Meanwhile, the services industries grew 4.3 per cent year on year in Q4, slightly higher than the 4 per cent recorded in Q3. For the full year, the sector rose by 4.1 per cent.

Among the services sectors, wholesale and retail trade as well as transportation and storage clocked the biggest growth, collectively expanding 5.6 per cent year on year in Q4, extending the previous quarter’s 5.2 per cent growth.