[SINGAPORE] The Ministry of Trade and Industry (MTI) upgraded its full-year growth forecast range on Tuesday (Aug 12), but warned: “However, the economic outlook for the rest of the year remains clouded by uncertainty, with the risks tilted to the downside.”
The upgrade to a range of 1.5 to 2.5 per cent, from 0 to 2 per cent before, largely reflects better-than-expected performance in the first half of the year, said MTI.
The ministry said it will continue to monitor developments in global and domestic economies closely, and adjust the forecast if necessary over the course of the year.
For the second quarter, year-on-year growth was revised upwards marginally to 4.4 per cent, from the advance estimate of 4.3 per cent. This was an improvement from the preceding quarter’s 4.1 per cent.
With the Q2 figure, gross domestic product growth for the first half was 4.3 per cent.
On a quarter-on-quarter seasonally adjusted basis, the economy grew 1.4 per cent in Q2, similar to the advance estimate and reversing from Q1’s 0.5 per cent decline. Singapore thus avoided a technical recession, defined as two straight quarters of quarterly contraction.
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Expected upgrade
After Q2 advance estimates in mid-July beat market expectations, several private-sector economists raised their full-year growth forecasts.
At its macroeconomic review in end-July, Singapore’s central bank also said full-year growth for 2025 may be firmer than previously forecast, with the economy’s output likely to be close to potential.
Back in April, with the advance Q1 figures, MTI downgraded its full-year forecast to between 0 and 2 per cent, from between 1 and 3 per cent before. This was due to a “significant deterioration” in the external demand outlook as the US-China tariff war intensified.
When the Q1 figures were updated in May, MTI maintained that lower forecast. On Tuesday, MTI noted that it did so in view of the potential impact of sweeping tariffs announced in April.
“Since then, the performance of most advanced and regional economies has been more resilient than expected,” said the ministry.
The US’ 90-day pause on reciprocal tariffs postponed the negative potential impact, while front-loading activity temporarily boosted production and exports.
Tensions have de-escalated, as the US struck deals with several trading partners – including the eurozone, Japan, South Korea and several South-east Asian countries – for lower-than-previously-announced reciprocal tariffs.
MTI noted that US-China talks continue, indicating a possible extension of their tariff truce.
As the 2025 growth of key economies will not be as weak as expected, MTI updated its assessment of Singapore’s external outlook.
Weakness ahead
However, in the second half of the year, growth is expected to slow for Singapore’s major trading partners, as the front-loading boost dissipates and reciprocal tariffs take effect.
US growth may weaken with a cooling labour market and dampened consumer spending. The eurozone may see a pullback in exports when US tariffs kick in during H2.
China’s growth is also projected to ease, as export growth weakens even though domestic consumption and investment growth remain firm.
In South-east Asia, growth of key economies is similarly expected to moderate due to US’ reciprocal tariffs and softening domestic demand in some economies.
MTI said: “More importantly, significant uncertainties remain in the global economy due in part to the continued unpredictability of the US’ trade policies, including the timing and extent of the sectoral tariffs on pharmaceutical products and semiconductors.”
Risks in the global economy are tilted to the downside, it said. First, a re-escalation of tariff actions could lead to a renewed spike in economic uncertainty, causing businesses and households to pull back sharply on spending and hiring.
Second, a sharper-than-expected tightening of global financial conditions could shock financial markets, leading to destabilising capital flows. These could trigger latent vulnerabilities in banking and financial systems.
Third, potential escalations in geopolitical tensions could disrupt supply of energy commodities, putting renewed pressure on global energy prices.
Amid this backdrop, slower growth in Singapore’s outward-oriented sectors could thus drag its overall growth in H2 – particularly in manufacturing, where growth is expected to weaken as US tariffs weigh on end-market demand.
Nevertheless, transport engineering and precision engineering clusters remain as “some bright spots” in the sector, said MTI.
Growth in the wholesale trade is similarly expected to slow for the remainder of 2025; finance and insurance will see dampened growth; and consumer-facing sectors such as retail trade and food and beverage (F&B) services are anticipated to stay lacklustre.
Sectoral performance
MTI said that on a yearly basis, GDP growth in Q2 was primarily driven by the wholesale trade, manufacturing, finance and insurance, and transportation and storage sectors.
Of the 13 sectors tracked, only F&B services recorded a year-on-year contraction. The sector shrank 0.5 per cent on year, extending the 0.7 per cent year-on-year fall in the preceding quarter.
Manufacturing expanded 5.2 per cent year on year in Q2, up from 4.7 per cent in the previous quarter. All clusters marked output rises, except for chemicals and general manufacturing.
The sector shrank 0.4 per cent quarter on quarter, extending the 5.2 per cent contraction before.
Construction rose 6 per cent year on year, faster than 4.9 per cent in the previous quarter, with both public and private sector construction output expanding.
Sequentially, the sector grew 5.7 per cent, reversing from a 2 per cent fall in the preceding quarter.
The wholesale trade sector grew 4.7 per cent year on year, accelerating from 4 per cent the previous quarter. Growth was driven by the machinery, equipment and supplies segment, while the fuels and chemicals as well as “others” segments also expanded.
The sector grew 2.8 per cent quarter on quarter, turning around from a 0.5 per cent contraction in Q1.
Year on year, growth in five other sectors – retail trade, finance and insurance, professional services, administrative and support services, as well as “other services industries” – picked up.
Growth in the transportation and storage, information and communication, and real estate sectors slowed on a yearly basis.
The accommodation sector turned around to mark an expansion year on year.
