Singapore keeps 2025 growth forecast despite easing US-China tensions, upward revision of Q1 growth
Despite a slight improvement to the external demand outlook, risks are tilted to the downside; a technical recession is possible, says MTI
[SINGAPORE] Despite first-quarter growth coming in marginally higher than advance estimates, the Ministry of Trade and Industry (MTI) maintained its 2025 full-year forecast range at 0 to 2 per cent.
Singapore’s external demand outlook for the rest of the year has “improved slightly” with a de-escalation of US-China trade tariffs, yet the global outlook remains clouded by uncertainty and risks are tilted to the downside, said MTI on Thursday (May 22) morning.
With Q1 gross domestic product shrinking sequentially, a technical recession – two straight quarters of contraction – “is a possibility”, said MTI permanent secretary Dr Beh Swan Gin at a press briefing.
But he noted that this may not mean a “full-blown economic recession”, which depends on year-on-year figures.
For Q1, year-on-year growth was revised upwards to 3.9 per cent, marginally higher than the advance estimate of 3.8 per cent, but moderating from the 5 per cent growth in the fourth quarter of 2024.
The economy shrank 0.6 per cent on a quarter-on-quarter seasonally adjusted basis, reversing from Q4’s 0.5 per cent growth. Though less than the 0.8 per cent contraction in the advance figures, this still paves the way for a potential technical recession.
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With the release of advance Q1 figures in April, MTI downgraded its full-year growth forecast range to between 0 and 2 per cent, from between 1 and 3 per cent previously.
That downgrade was due to a “significant deterioration” in Singapore’s external demand outlook with the intensifying US-China tariff war, which was expected to hit global trade and growth.
Dr Beh said: “Given the heightened uncertainty, MTI will continue to monitor developments closely, and make adjustments to the forecast as necessary in the coming quarters.”
Asked if MTI may hold back on upward revisions to forecasts as trade tensions could flare up again, he replied that it was “premature” to comment, as much depends on what sort of agreement the US strikes with major trading partners.
On Thursday, MTI noted that the US has been in trade talks with several economies affected by its tariffs, including China. The US and China have also agreed to slash tariffs for 90 days from May 14.
“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,” the ministry said.
However, it flagged three downside risks. First, elevated economic uncertainty may cause a “larger-than-expected” pullback in economic activity, as households and businesses take a wait-and-see approach.
Second, a re-escalation in tariff actions could cause a “full-blown” global trade war and a sharper slowdown. Third, disruptions to the global disinflation process and recession risks could destabilise capital flows, triggering “latent vulnerabilities” in banking and financial systems.
Sectoral outlook
MTI noted that Q1 growth was largely driven by Singapore’s wholesale trade, manufacturing as well as its finance and insurance sectors – with the first two likely to have been partly supported by front-loading ahead of anticipated US tariff hikes.
For the rest of the year, MTI expects the growth of outward-oriented sectors to slow.
“In particular, the 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.”
But within the sector, transport engineering remains a bright spot, especially given the shift towards higher value-added aircraft maintenance, repair and overhaul works in Singapore.
The manufacturing slowdown, alongside weaker global trade, is expected to weigh on trade-related services sectors such as wholesale trade; transportation and storage; and finance and insurance.
Worsening business expectations will likely cause companies to cut back on discretionary spending, dampening the growth of the information and communications as well as professional-services sectors.
Finally, growth in consumer-facing sectors such as retail trade as well as food and beverage services is likely to remain lacklustre, as locals continue spending abroad and domestic labour market conditions weaken.
Sectoral performance
In Q1, outward-oriented sectors generally had year-on-year growth, but quarterly contraction.
Manufacturing growth slowed to 4 per cent year on year, moderating from 7.4 per cent in the previous quarter. Growth was mainly driven by the electronics, precision engineering and transport engineering clusters.
The sector shrank 5.8 per cent quarter on quarter, weakening from flat growth before.
Construction grew 5.5 per cent, up from 4.4 per cent in the previous quarter, with increases in both public and private-sector construction output. Sequentially, the sector contracted 1.4 per cent, reversing Q4’s 0.3 per cent expansion.
The wholesale trade sector grew 4.2 per cent year on year, slowing from 6.7 per cent the previous quarter. Growth was led by the machinery, equipment and supplies segment, with the fuels and chemicals segment and the “others” segment also expanding.
But the sector shrank 0.4 per cent quarter on quarter, reversing from Q4’s 0.9 per cent growth.
For domestic-oriented services, retail trade grew by a marginal 0.1 per cent, accommodation shrank 0.9 per cent, and food and beverage services shrank 0.2 per cent.
In contrast, growth accelerated for several services sectors: to 5.2 per cent for transportation and storage; to 7.1 per cent for real estate; to 1.4 per cent for professional services; to 4.4 per cent for information and communications; and to 2.8 per cent for administrative and support services.
Other services industries grew 1.1 per cent, slowing from 3.1 per cent the previous quarter.
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