Singapore Economy Shows Early Signs of Slowdown Amid Trade Challenges

Singapore’s economic expansion is displaying initial indications of weariness as the Ministry of Trade and Industry (MTI) revised its full-year 2025 GDP prediction to a range of 0% to 2%, pointing to “rising headwinds for global trade,” as per analysts.

Preliminary estimates indicated that 1Q GDP growth declined to 3.8% YoY, a decrease from 5% in the preceding quarter. Every three months, the economy shrank by 0.8%, with the manufacturing and services industries driving the decline.

The Ministry's downgrade indicates that external threats are increasingly impacting Singapore's economy, which relies on exports. Analysts at CGS International described the GDP outcome as “below expectations,” warning that “we expect weaker economic growth for the rest of 2025 as sweeping tariffs reduce external demand.”

Maybank economists concurred, indicating “we are pencilling in a growth slowdown, but not a recession at this stage.” They admitted that the contraction in the first quarter was more pronounced than expected, as manufacturing output declined and certain export-focused services, like finance and insurance, experienced a slowdown.

At the heart of the slowdown is an escalating storm of global trade disputes. Analysts at CGS International have noted that “Singapore’s high dependence on external demand leaves it particularly vulnerable to global trade disruptions.”

To maintain favorable economic conditions, MAS also lowered its core inflation prediction to 0.5%–1.5% for 2025, pointing to declining energy prices, easing labor cost pressures, and higher government subsidies.

Singapore maintains fiscal capacity to bolster the economy should circumstances decline. Maybank projects a fiscal surplus of $14.3 billion that can be utilized in 2025 without the need to tap into previous reserves.

Although growth has decelerated and risks are increasing, analysts continue to be cautiously optimistic. Maybank maintains its prediction of 2.1% growth for 2025, slightly exceeding the adjusted official range, bolstered by construction activity, decreasing interest rates, and possible fiscal stimulus.