PUBLISHED ONApril 14, 2025 3:15 AMByDana LeongThe Ministry of Trade and Industry (MTI) downgraded Singapore's economic growth forecast for 2025 to zero to two per cent, citing the current US-China tariff war as a major risk to growth.
In February, Singapore's gross domestic product (GDP) was forecast to be one to three per cent, where uncertainties due to the then-new US administration and easing of trade with China and the US had been factored in.
But the imposition of sweeping tariffs by US president Donald Trump on April 5 has led to the latest downgrade.
"Although there has been a temporary 90-day pause in the implementation of the higher reciprocal tariffs except for China, the tariff war between the US and China has intensified, with an escalating cycle of tit-for-tat tariffs being imposed by both sides," the ministry said in a statement released on Monday (April 14).
MTI also expects more product-specific tariffs to be imposed in the near future, which would increase the impact of the trade war.
In terms of the downside risks to the global economy, it cited a larger-than-expected pullback in economic activity amid heightened uncertainty as businesses and households are more likely to adopt a "wait-and-see" approach.
Global supply chains are also likely to be impacted as a result of the tariffs, which could even escalate into a full blown trade war, the ministry said.
"MTI’s assessment is that the external demand outlook for Singapore for the rest of the year has weakened significantly."
The weaker global demand is likely to negatively impact Singapore's manufacturing sector, which will subsequently lead to a slowdown in demand for shipping and air cargo services.
The finance and insurance sector are also expected to face weaker trading volumes due to risk-off sentiments.
Singapore's economic growth for the first quarter of 2025 was 3.8 per cent year-on-year, down from 5.0 per cent in the previous quarter.
"This was due to sequential declines in manufacturing and some outward-oriented services sectors such as finance & insurance in tandem with slowing external demand," said MTI.
It consequently downgraded Singapore's growth outlook for 2025, but said that it will make further adjustments based on any global and domestic developments.
Separately, the Monetary Authority of Singapore (MAS) also eased monetary policy on Monday for the second time this year, citing financial market volatility as a result of growing trade tensions due to the latest US tariffs.
Speaking to AsiaOne, Hak Bin Chua, regional co-head of macro research at Maybank, said that he is "pencilling in a growth slowdown, not a recession at this stage".
Maybank, however, has forecast Singapore’s economic growth at 2.1 per cent for this year, slightly above the upper limit of MTI’s expected 2 per cent.
"If the delayed 'Liberation Day' tariffs are eventually implemented, the impact will be worse due to second-round effects through Asia. More immediately, the damage to the economy emanates from the hit to investment from increased trade uncertainty," said Sheana Yue, economist at Oxford Economics, when speaking to AsiaOne.
Expecting lower growth prospects amid US tariffs, Oxford Economics lowered its 2025 growth forecast for Singapore to 1.6 per cent and expects further loosening of monetary policy by the MAS later this year.
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