As expected, Singapore’s Ministry of Trade and Industry (MTI) trimmed the GDP growth forecast this year from 1.0%-3.0% previously to 0%-2.0%. This is a sharp slowdown from the 4.4% seen in 2024, says Selena Ling, chief economist at Oversea-Chinese Banking Corporation (OCBC).
Given the state of the world, fraught with tariff uncertainties, the manufacturing, wholesale trade, transportation and storage industries will face vulnerabilities from a trade slowdown, says Ling in an April 14 note, while the finance and insurance industries will also face heightened volatilities amid risk-off sentiments, tepid credit intermediation and consumer credit card spending.
A technical recession is possible as the brunt of the initial US tariff announcements has wrecked “significant havoc” on financial markets this month, adds Ling, who is also head of global markets research and strategy at OCBC. “[The] real economic fallout is anticipated in the coming months.”
The Singapore economy expanded 3.8% y-o-y in 1Q2025 but contracted 0.8% q-o-q after seasonal adjustments, with the latter marking the first q-o-q decline since 1Q2023. 2Q2025 could contract again sequentially q-o-q after seasonal adjustments, bringing the Singapore economy into a technical recession, says Ling.
This assumes that there is no near-term improvement in the global trade and growth prospects arising from the negotiations on the tariff front that leads to a more sustained lifting of reciprocal tariffs, she adds.
For 2H2025, Singapore’s GDP growth is likely to sink further due to the high base last year, says Ling, possibly to near-stalling speed in y-o-y terms. In 3Q2024, Singapore’s economy grew 5.7% y-o-y and by 5.0% y-o-y in 4Q2024.
See also: Citing escalating trade war, government lowers 2025 GDP growth forecast to 0% to 2%
OCBC’s full-year 2025 growth forecast is now “closer to 1.6% y-o-y”, assuming that the 10% tariff on Singapore remains intact, down from its previous 2.1% forecast prior to the rapid escalation of the US-China tariffs.
“Notably, the manufacturing sector is not forecast to shrink, again due to the high base in 2H2024, under the weight of tariffs for our major trading partners, albeit the construction and services sector should still expand y-o-y this year,” says Ling.
Room for further easing
The Monetary Authority of Singapore (MAS) also eased monetary policy settings for the second straight meeting by reducing slightly the rate of appreciation, with no change to the band width or the level at which it is centred.
This is in line with OCBC’s house view for a 50-basis point flattening of the Singapore dollar Nominal Effective Exchange Rate (S$NEER) slope.
MAS also cut the 2025 headline and core inflation forecasts to 0.5%-1.5% y-o-y, down from 1.5%-2.5% and 1%-2% previously.
The central bank cited the significant easing in January-February inflation outturns, the modest imported inflation outlook amid slowing global demand and lower energy commodity prices, as well as cooling domestic labour market with implications for nominal wage growth amid improving labour productivity.
MAS also noted that the re-basing of consumer price index (CPI) in January only accounted for a small part of the inflation step-down.
Ling thinks there is room for further monetary policy easing if economic conditions deteriorate further. “The rhetoric is clearly dovish with reference to the output gap turning negative and the downside inflation risks. The reciprocal tariffs are likely deflationary for the Singapore economy as China diverts exports to the rest of the world — including Asean — and the dampening effects on business and consumer demand are likely to play out in the coming months.”
Ling is bringing down her 2025 headline and core inflation forecasts to 1.2% y-o-y from 1.5% y-o-y previously, given the escalating US-China trade war, widening financial market volatility and economic implications on trade and growth prospects of major trading partners, especially those of China and Asean.
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Complementing coming fiscal policy
That said, monetary policy will only complement the fiscal policy accommodation that is likely to follow, says Ling. A taskforce chaired by DPM Gan Kim Yong has already been set up to help businesses and workers address the immediate uncertainties, strengthen their resilience and better adapt to the new economic environment.
“Notably, the policy stance is one of standing ready to do more, if and when necessary.” says Ling. “Singapore is well-positioned to do so as it has the financial resources to do so. More fiscal support, possibly in the form of an off-budget package, could be forthcoming later this year if economic conditions continue to soften from here.”
