Economists keep 2.6% forecast for Singapore’s 2025 growth; Indonesia slowdown to have ‘limited’ impact

[SINGAPORE] Private-sector economists maintained a median forecast of 2.6 per cent for Singapore’s 2025 growth – with 3.8 per cent growth expected in the first quarter – and lowered their expectations for inflation, in a quarterly survey on Wednesday (Mar 19).

The survey was sent out on Feb 14, but economists told The Business Times that developments since then – including Indonesia’s economic slowdown and market turmoil – have not changed their views.

In the latest survey of professional forecasters by the Monetary Authority of Singapore (MAS), the median forecast for full-year headline inflation fell to 1.7 per cent, from 1.9 per cent in the previous quarter’s survey. For core inflation, the forecast slipped to 1.5 per cent, from 1.8 per cent.

These expectations fall within official full-year forecast ranges: growth of 1 to 3 per cent, headline inflation of 1.5 to 2.5 per cent, and core inflation of 1 to 2 per cent.

For Q1 2025, headline inflation is predicted to be 1.5 per cent, and core inflation, 1.1 per cent.

Compared with December’s survey, fewer respondents now expect monetary policy to be loosened in April’s upcoming meeting, with more expecting it in July instead.

On Jan 24, MAS slightly reduced the slope of the Singapore dollar nominal effective exchange rate policy band, in the first loosening since 2020.

In the latest survey, 15.8 per cent of respondents expected another such move in April, down from 37.5 per cent in the last survey. None expected changes to the position or width of the band in April.

Instead, 29.4 per cent expected the slope to be reduced in July, up from 6.3 per cent in the last survey. In July, one respondent also expected the band to be re-centred lower, and one expected it to be widened.

Maybank’s full-year growth forecast matched the survey median at 2.6 per cent, with economist Brian Lee expecting “easing monetary conditions, a generous election Budget and construction of major projects” to cushion the impact of US tariffs.

But he noted that manufacturing was previously boosted by tariff-induced front-loading of orders. This is “starting to dissipate”, as seen from the purchasing managers’ index falling to a seven-month low of 50.7 in February.

“This suggests that manufacturers could be turning more cautious on production, as global trade uncertainty climbs with Trump’s broadening trade war and the ensuing retaliation from China, Canada and the European Union,” he said.

After better-than-expected Q4 growth, OCBC chief economist Selena Ling expects Q1 growth momentum to moderate amid “heightened uncertainties” from tariffs, as well as the threat of reciprocal and sectoral tariffs.

Limited impact from Indonesia

Geopolitical tensions, including from higher tariffs, remained the most-cited downside risk, named by all respondents – just as in December’s survey. All respondents also named it the top downside risk.

This was followed by weaker growth in China, cited by 43.8 per cent, and a resurgence in inflation, flagged by 18.8 per cent.

DBS economist Chua Han Teng said: “Geopolitical tensions, particularly the risks of higher tariffs and possibility of tit-for-tat trade war, will likely remain a key focus for investors in the coming quarters.”

Trade tensions are a bigger risk than Indonesia’s economic situation, with the latter unlikely to have a significant impact, economists said in response to BT queries.

Indonesia’s growth slowed to 5.03 per cent in 2024, falling short of official targets, while its stock market plunged into turmoil this week on fiscal concerns.

Yet, this should have only a limited impact on Singapore, “barring a prolonged market volatility situation”, said Ling.

“Since market sentiments towards emerging markets are increasingly fragile, the risk of market contagion cannot be completely off the table,” she added. She noted a recent pickup in global financial market volatility, but more in reaction to US tariffs and fading confidence in tech giants.

Maybank’s Lee said that compared to Indonesia, Singapore’s more important export markets are the US, European Union, and North Asian markets such as China. “On balance, I would expect Singapore’s growth to be impacted more by the outlook for global trade and large economies like the US and China.”

CGS-CIMB economic adviser Song Seng Wun said weaker business and consumer confidence could dampen Indonesia’s discretionary spending, with spillovers to Singapore in the form of less business travel and tourist spending.

But he does not expect this to be a “big drag” on growth. “The bigger risk to Singapore comes from protectionist policies on the US front, which will dampen regional growth more significantly from the second half of the year.”

For upside risks, more robust growth in China was cited the most, by 60 per cent of respondents, on a par with December’s figure. It was named the top upside risk by 13.3 per cent.

Other key upside risks were a sustained tech cycle upturn, cited by about half, and milder-than-expected trade tensions, cited by a third.

Components of growth

Across five broad sectors, economists’ full-year median growth forecasts rose for only manufacturing, to 2.9 per cent from 2.7 per cent in the previous survey. Despite this, the growth forecast for non-oil domestic exports fell to 2.8 per cent, from 3.5 per cent before.

Expectations worsened significantly for the domestic-oriented accommodation and food services sector, and dipped for construction.

For 2026, economists expect growth to slow to 2.3 per cent, but headline inflation and core inflation to edge up to 1.8 per cent and 1.7 per cent, respectively.

The survey was sent to 25 professional forecasters and received 20 responses. The survey reflects their views and not those of MAS.

In the latest survey, MAS refined its methodology for growth and inflation forecasts. Previously, respondents were given a set of ranges – for example, growth of above 5 per cent, growth of 4.5 to 4.9 per cent, and so on – and asked how probable each range was.

In the new survey, respondents were asked to give five specific estimates of their own, with a probability for each one.