Singapore dodges recession on tariff-led exports, construction
Gross domestic product grew 1.4% on a seasonally adjusted basis in the three months through June, according to advance estimates released Monday from the Ministry of Trade and Industry, versus a forecast for a 0.8% increase and a revised 0.5% contraction in the first quarter. Construction also drove activity, surging 4.4%, following a 1.8% quarter-on-quarter contraction in the first three months of the year.
GDP in the quarter also expanded from a year earlier, at 4.3%. That compares with a median forecast of 3.6% growth in a Bloomberg survey of economists.
The reversal from last quarter was driven by 'front-loading effects' in manufacturing, said Selena Ling, head of research and strategy at Oversea-Chinese Banking Corp., who warned questions remain over 'how much braking momentum will kick in from Aug. 1 when tariffs hit.'
The trade ministry had earlier flagged the risk of a recession, following the contraction at the start of the year, and economists expect the central bank, the Monetary Authority of Singapore, to remain cautious at its policy review later this month. The MAS has predicted the unwinding of some regional exports to intensify in the second half of the year.
Singapore was hit with a 10% US tariff by President Donald Trump, lower than its Southeast Asian neighbors. But with trade equaling about three times its GDP, the city-state remains exposed to any sustained slowdown in global commerce.
'Looking forward, there remain significant uncertainty and downside risks in the global economy in the second half of 2025,' the ministry said, 'given the lack of clarity over the tariff policies of the US.'
Key Details:
Monday's data showed that Singapore's services sector collectively grew 4.8% on an annual basis, the ministry said. It added that the increase was partly led by 'front-loading activities' ahead of the Aug. 1 expiry of a pause in Trump's proposed tariffs.
A rise in public sector construction output also supported growth, the ministry added, reversing the 1.8% contraction in the previous quarter.
'We expect to see a slowdown in the second half of the year,' said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group, who's expecting no change to monetary policy settings later this month. 'After today's strong GDP number, I expect most analysts to shift towards no change as well.'
The government earlier downgraded its forecast for 2025 GDP growth to 0%-2%, slowing from 4.4% last year.
Bloomberg Economics expects the road ahead to be 'even more difficult as more US tariffs get implemented and demand for exports gets satiated by front-loading,' said Tamara Mast Henderson, ASEAN economist for Bloomberg Economics. She expects Singapore's growth to slow to 0.9% this year. –BLOOMBERG
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