SINGAPORE’S economy kick-started 2025 on a faster-than-expected note, enjoying a flurry of manufacturing and export activity as businesses rushed to avoid the imposition of higher US tariffs.
Gross domestic product grew 3.9% in the three months through March from a year earlier, the Ministry of Trade and Industry said in its final estimate on Thursday. The figure compares with a median forecast of a 3.6% growth in a Bloomberg survey of economists, and the government’s advanced estimate of 3.8%.
On a seasonally adjusted quarterly basis, GDP fell 0.6%, versus a forecast of 1% contraction.
The data shows how the US-China trade war and China’s sluggish recovery were seeping deeper into the region at the start of the year. Since then, the world’s two biggest economies have called a truce, agreeing to a 90-day negotiating window under which they have lowered tariffs on each other’s goods.
Singapore, which was hit with a 10% tariff, got off relatively lightly compared to its neighbors. But with trade accounting for about three times its GDP, the city-state remains acutely exposed to any sustained slowdown in global commerce.
“Growth in the manufacturing and wholesale trade sectors were likely to have been partly supported by front-loading activities ahead of anticipated US tariff hikes,” the Ministry of Trade and Industry said in a press release. “By contrast, the accommodation and food & beverage services sectors contracted, with the former weighed down by the weak performance of the higher value-added hotel segments.”
The government maintained a recently downgraded forecast for 2025 GDP growth at 0%-2% as US tariffs clouded the outlook for global trade. Prime Minister Lawrence Wong earlier warned that a recession can’t be ruled out.
A temporary de-escalation of trade tensions after the US-China tariff truce should slightly improve Singapore’s external demand outlook for the rest of the year.
“Notwithstanding the positive developments in recent weeks, the global economic outlook remains clouded by significant uncertainty, with the risks tilted to the downside,” the ministry said.
Businesses and households may adopt a wait-and-see approach before spending. A re-escalation of tariff actions could also lead to a full-blown trade war that upends supply chains, raises costs and causes a global economic slowdown, it said. That could trigger volatile fund flows, hitting banking and financial systems.
Key details from the GDP print:
- Manufacturing: up 4% y/y
- Construction: up 5.5% y/y
- Services-producing industries: up 3.6% y/y
Bloomberg Economics expects a 0.9% growth this year, though it sees some upside risk from the 90-day US-China trade truce. Another supportive factor for Singapore was the outcome of this month’s election.
“The strong showing of Singapore’s ruling People’s Action Party in the general election on May 3 reduces uncertainty at a critical juncture — as businesses and investors navigate US President Donald Trump’s upending of global trade and security relationships,” said Tamara Mast Henderson, ASEAN economist for Bloomberg Economics.
Last month, the Monetary Authority of Singapore eased its monetary policy settings for the second time this year. It will hold its next review in July. –BLOOMBERG
The post Singapore kicks off 2025 on strong note, flags downside risks appeared first on The Malaysian Reserve.
