The Monetary Authority of Singapore (MAS) projects Singapore’s economy to be “relatively subdued” for the rest of the year.
The forecast follows the nation avoiding a technical recession in the 2Q2025.
Based on advance estimates, Singapore’s economy expanded by 1.4% q-o-q seasonally-adjusted, reversing from the 0.5% contraction in the first quarter. On a y-o-y basis, gross domestic product (GDP) growth stayed firm at 4.3%, extending the 4.1% growth in the previous quarter.
At the same time, core and consumer price index (CPI) All Items inflation are expected to average between 0.5% and 1.5% respectively in 2025.
The update comes about from MAS’ July Macroeconomic Review, which is published quarterly in conjunction with the release of the Monetary Policy Statement (MPS).
On June 30, MAS announced in the MPS that it would maintain the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band in July, following easing measures earlier in the year.
See also: Fullerton’s EQDP-supported fund to launch by 4Q2025; only invest in SGX stocks
In its April 2025 monetary policy review, MAS kept the S$NEER policy band on a “modest and gradual” appreciation path, but reduced its slope slightly. Since the April review, the S$NEER has strengthened toward the top of the policy band amid the broad-based depreciation in the US dollar.
On GDP, the team at MAS notes that weaker performances in the external-facing trade-related and modern services clusters will likely weigh on growth, while the domestic-oriented cluster “settles” at around its pre-pandemic pace amid some support from a strong pipeline of public and private construction projects.
They add: “Nevertheless, the stronger-than-expected outturn in the first half of 2025 implies that GDP growth could be more resilient this year than previously envisaged in the April 2025 Review, with the positive output gap narrowing to close to zero for the year as a whole.”
See also: FTSE ST Mid & Small Cap Index generates 9% total return
The stronger-than-expected performance was mainly attributed to a pickup in the nation’s trade-related cluster.
“Since the initial Liberation Day tariff shock, global trade tensions have simmered down amid the pause on reciprocal tariffs and subsequent trade truce between the US and China,” writes the team.
This “motivated” the front-loading of exports in the Asean region, which, along with the exemptions of electronics and pharmaceutical products from the tariffs, provided some support to Singapore’s trade-related activities.
With regards to their outlook, the team at MAS sees the uncertainty facing Singapore’s economy to persist.
The growth trajectory, they note, would be “unlike previous downturns”, when economic output experienced a sharp fall-off by 5% or more within four quarters from its peak and rebounded decisively thereafter.
Instead, as companies and firms remain wary of the longer-term impact of tariff and non-tariff barriers, longer-term plans could be put on hold, while incremental adjustments to production and investment decisions are made.
“Consequently, business expenditure might decline gradually, extending the drag on gross fixed capital formation and hence GDP growth over a more prolonged period,” writes the team.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
External inflationary pressures are meanwhile expected to stay benign, as softer global demand and ample supply weigh on regional goods prices. Domestic cost pressures should also stay modest, supported by moderating wage growth and improved labour productivity.
In the second quarter, MAS core inflation held steady, as a narrow range of administrative price increases balanced out easing inflation across most goods and services.
Overall, Singapore inflation stayed low due to subdued imported and domestic costs, alongside weak demand for certain CPI items.
Rest of the world
On a global basis, global headline inflation eased to 1.8% y-o-y in the 1Q2025 and further to 1.6% during the April to May period.
The team at MAS attributes this downtrend primarily to the moderate price pressures observed in Asia, excluding Japan, and the Eurozone.
Notably, China experienced deflation between February and May, while inflation outturns in the Asean-five economies of Indonesia, Malaysia, the Philippines, Singapore, and Thailand have been persistently below their respective central bank target ranges.
When compared against “historical episodes”, the recent inflation prints in most Asean-five economies were “markedly weaker” than that implied by prevailing domestic output gaps, which are “broadly hovering” around zero.
Japan is the sole outlier among the major Asian economies where inflation is rising, driven by substantial increases in food and energy prices due to domestic supply-side constraints.
In the US, the team notes that the impact of import tariffs on inflation has been modest thus far.
This is partly because only an estimated 10% of its personal consumption expenditure basket is imported, while most countries have remained at the baseline 10% tariff rate, which MAS sees is likely to be “more easily absorbed” either by US firms or foreign exporters.
Amid tariff uncertainty, US retailers have also been stockpiling goods, allowing them to avoid adjusting prices immediately.
Global GDP growth was “firmer than expected” in the 1H2025, supported by robust exports following the pause in Liberation Day tariffs and the US-China trade truce.
However, the team at MAS expects the boost from front-loaded export orders is expected to wane in the coming quarters.
They write: “At the same time, the anticipated rise in tariff rates and persistent uncertainty are likely to weigh on final demand across many economies.”
With this, they forecast the growth in Singapore’s major trading partners to slow over the remainder of 2025 and into 2026. Against this backdrop, Singapore’s growth is expected to moderate over the rest of the year.
“Externally-oriented sectors are likely to see softer activity as front-loading effects fade and global demand weakens,” writes the team at MAS.
These external headwinds, they note, may spill over into domestic-oriented sectors such as retail and food and beverage (F&B). Despite this, “generally healthy” household balance sheets and government support measures should “help cushion” the impact.
