The government has downgraded Singapore's GDP growth forecast this year from 1.0% to 3.0% to 0% to 2.0%, given the escalating trade war and therefore growing downside risks.
"The sweeping tariffs introduced by the US, and the ongoing trade war between the US and China, are expected to weigh significantly on global trade and global economic growth," says the Ministry of Trade and Industry (MTI) on April 14.
In particular, the growth outlook of the US has deteriorated as rising import costs are likely to weaken consumption. China’s growth outlook has also softened as its export growth is expected to stall amidst the trade war with the US, says MTI.
Meanwhile, the growth outlook of regional economies will be negatively affected by a fall in external demand due in part to the tariffs’ wider impact on global trade and growth.
Business and consumer sentiments will also be dampened, thereby crimping domestic consumption and investments in many economies.
"The situation will continue to evolve as the US and other economies weigh their moves amidst heightened market volatility," says MTI.
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MTI warns that the spike in uncertainty may lead to a larger-than-expected pullback in economic activity as businesses and households adopt a “wait-and-see” approach before making spending decisions.
Also, further tariff measures, including retaliatory tariffs, could lead to a full-blown global trade war, which will upend global supply chains, raise costs and lead to a far sharper global economic slowdown.
Thirdly, disruptions to the global disinflation process and rising recession risks in both advanced and emerging markets could lead to destabilising capital flows that could trigger latent vulnerabilities in banking and financial systems.
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"Against this backdrop, MTI’s assessment is that the external demand outlook for Singapore for the rest of the year has weakened significantly. This has led to a deterioration in the outlook of outward-oriented sectors in Singapore," the ministry adds.
Besides the manufacturing sector, wholesale trade and transport and storage sectors suffering from the direct impact of the trade war, MTI warns that the finance & insurance sector could see weaker trading activity due to risk-off sentiments that will adversely affect as well.
"Given the significant downside risks, MTI will continue to closely monitor global and domestic developments, and make further adjustments to the forecast if necessary," says MTI.
Meanwhile, according to MTI's advanced estimates, Singapore's 1Q2025 GDP was up just down 3.8% y-o-y, slower than the 5% growth in the previous quarter, due to sequential declines in manufacturing and some outward-oriented services sectors such as finance & insurance in tandem with slowing external demand.
