Economists upgrade 2025 GDP outlook even if economy expected to slow in H2
This is even as they expect GDP to slow in the second half of 2025, as the boost from the front-loading of economic activities fades.
Most economists' forecasts are now at or higher than the upper bound of the official forecast range of '0 to 2 per cent', which the Ministry of Trade and Industry (MTI) set in April, shortly after US President Donald Trump unleashed his 'Liberation Day' tariffs.
Among them, Maybank is most bullish with a forecast of 3.2 per cent, up from 2.4 per cent previously. Both Citi and UOB have raised their outlook to 2.1 per cent, from 1.7 per cent; OCBC is also penciling 2.1 per cent, but from 1.6 per cent earlier. Barclays has upgraded its forecast to 2 per cent, from 1 per cent.
DBS, Oxford Economics and RHB have maintained their outlook at 2 per cent, whereas Standard Chartered has kept it at 1 per cent.
The upgrades come after MTI's advance estimates on Monday (Jul 14) showed that Singapore's economy grew 4.3 per cent year on year in Q2, well above the 3.6 per cent that private-sector economists polled by Bloomberg were predicting.
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Q1 growth was also revised upwards to 4.1 per cent year on year, from an earlier estimate of 3.9 per cent.
On a seasonally adjusted quarterly basis, the economy expanded 1.4 per cent, a turnaround from the 0.5 per cent contraction in Q1. This means Singapore averted a technical recession, defined as two consecutive quarters of shrinkage in economic growth.
This brings year-on-year GDP growth for the first half of 2025 to 4.2 per cent.
'Singapore's resilient GDP growth in H1 was supported by front-loading of exports and, to a smaller extent, production in anticipation of further US tariffs,' said UOB associate economist Jester Koh.
However, Barclays regional economist Brian Tan noted that the boost may have stemmed from export front-loading around US trade policy 'from other economies going through Singapore' – rather than shipments from Singapore.
'MTI notably did not link front-loading to manufacturing performance in its press release, which suggests policymakers also see limited evidence that front-loading has significantly supported domestic exports from Singapore,' he said.
Tan added that MTI's statement 'suggests caution over whether the front-loading boost can sustain'.
Specifically, MTI said: 'Looking forward, there remain significant uncertainty and downside risks in the global economy in the second half of 2025, given the lack of clarity over the tariff policies of the US.'
The ministry did not change its forecast range but could potentially review it when the next quarterly economic survey is released in August.
Citi economist Kit Wei Zheng expects official growth forecast to be raised to 1.5 to 2.5 per cent or higher, noting that Deputy Prime Minister Gan Kim Yong said last week that the forecast would be revised 'as needed'.
Slower growth in H2
Most economists do not expect Singapore's GDP performance to sustain into H2.
'The biggest challenge will come from US trade policy,' said Sheana Yue, an economist at Oxford Economics.
Even if the tariff levied on Singapore does not exceed 10 per cent, she said, the city-state's trade-dependent economy 'isn't insulated from the indirect effects of higher global tariffs'.
'A particular challenge may arise from the focus on transhipment – Singapore's re-exporting sector accounts for roughly two-thirds of all trade,' she added.
UOB's Koh said the eventual 'payback' from front-loading may be more pronounced in trade-related services – wholesale trade, as well as transport and storage – rather than manufacturing.
'Any further growth drag in these sectors is likely to stem from weaker demand due to the tariffs themselves,' he said.
RHB group chief economist Barnabas Gan and associate research analyst Laalitha Raveenthar estimated that the current round of US tariffs could shave approximately 0.25 to 0.3 percentage points off Singapore's GDP, primarily through a 0.9 per cent reduction in exports.
However, Maybank economists Chua Hak Bin and Brian Lee believe the slowdown in Singapore and the region's exports could be 'milder than previously feared'.
Tariffs on Singapore-made goods would remain 'relatively competitive' compared with higher rates imposed on other US trading partners, said the duo.
Exports of electronics and pharmaceuticals should also continue to grow as long as exemptions remain in place, they said, adding that the broadening artificial intelligence (AI) demand is a tailwind for semiconductors.
Next monetary policy review
Most economists expect the central bank to adopt a 'wait-and-see' stance when it issues its next Monetary Policy Statement scheduled for month-end.
UOB's Koh said he still expects the Monetary Authority of Singapore (MAS) to ease policy further, with a higher likelihood that this may occur in October or January than later this month, 'once the payback effects from front-loading and the impact of tariffs more clearly translate into slowing growth momentum'.
For now, the stronger-than-expected H1 growth, benign global financial conditions, stable job market conditions and likely unchanged core inflation forecasts are buying MAS more time, said Citi's Kit.
'Policymakers (are) likely to await greater clarity on tariff negotiations before easing monetary policy,' he added.
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