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Business Times
5 days ago
- Business
- Business Times
Economists upgrade 2025 outlook after Q2 GDP turns out better than expected
[SINGAPORE] Several economists have raised their full-year economic outlook after advance estimates of second-quarter gross domestic product beat market expectations amid the 90-day pause in US retaliatory tariffs. 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 pencilling in 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. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 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.
Business Times
5 days ago
- Business
- Business Times
Economists upgrade 2025 GDP outlook even if economy slows in second-half year
[SINGAPORE] Several economists have raised their full-year economic outlook after advance estimates of second-quarter gross domestic product (GDP) beat market expectations amid the 90-day pause in US retaliatory tariffs. 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. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 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.
Business Times
5 days ago
- Business
- Business Times
Economists upgrade 2025 GDP outlook even if economy expected to slow in H2
[SINGAPORE] Several economists have raised their full-year economic outlook after advance estimates of second-quarter gross domestic product (GDP) beat market expectations amid the 90-day pause in US retaliatory tariffs. 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. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 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.
Business Times
23-06-2025
- Business
- Business Times
Middle East conflict could drive up Singapore's inflation, warn economists, after core inflation dips in May
[SINGAPORE] Escalating tensions in the Middle East could spark a new wave of inflationary pressures, warned private sector economists, even as Singapore's authorities kept to their full-year inflation forecast. The Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) on Monday (Jun 23) left their 2025 core inflation forecast of 0.5 to 1.5 per cent unchanged, after May's inflation readings dipped from the previous month. According to data from Department of Statistics, Singapore's core and headline inflation edged down to 0.6 per cent and 0.8 per cent respectively, in line with economists' expectations. On a month-on-month basis, core inflation was flat while headline inflation rose 0.7 per cent. Still, private-sector economists warned that the escalating conflict between Israel and Iran could bring a spike in oil and energy prices, and consequently put upward pressure on Singapore's inflation. This prompted UOB to raise its full-year core inflation forecast to 0.8 per cent, from 0.7 per cent, in 2025, and 1.6 per cent, from 1.3 per cent, in 2026, under its base case of a 'weaker pass through from higher oil prices' and a gradual de-escalation in geopolitical tensions. In the bank's worst case, core inflation could surge to 2.6 per cent in the first quarter of 2026, while moderating to 2.1 per cent in the second half of next year. Overall, core inflation could average 1.2 per cent and 2.3 per cent, respectively, in 2025 and 2026. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Its associate economist, Jester Koh, estimates that about 7.7 per cent of the overall consumer price index (CPI) basket could be directly impacted by higher oil prices, including components such as electricity, gas, petrol, point-to-point transport services, airfares, transport services of goods, as well as bus and train fares. 'Additionally, the spillover effects of higher utility, transportation and input costs on both goods and services inflation could be significant,' he added. According to UOB's estimates, year-on-year core inflation could rise by five to six basis points for every US$1 per oil barrel increase in Brent crude oil prices. Further, any supply-led spike in oil prices could filter through to Singapore's inflation 'largely within three to four months', said Koh in a research note. Meanwhile, RHB maintained its core inflation forecast of 1.1 per cent – but at the higher end of the official forecast range, the forecast factors a potential spike in oil prices driving higher global inflation. 'The recent US involvement in the Iran-Israel conflict, including strikes on Iranian territory, has driven oil prices higher over the weekend, extending a three-week rally,' said economists Barnabas Gan and Laalitha Raveenthar. 'Imported goods and services may become more expensive if global supply chains are disrupted or rerouted due to regional conflict.' Monetary policy settings MAS and MTI, however, said that the impact of the trade conflicts and higher global energy prices on Singapore is likely to be offset by the disinflationary drags exerted by weaker global demand. 'While crude oil prices have risen in recent weeks, they are for now still close to the average in 2024,' they said. Singapore's imported inflation thus should remain moderate. Agreeing, Maybank economists Chua Hak Bin and Brian Lee said imported prices should remain contained due to weak global demand and contained food commodity prices, amid abundant supply conditions. An appreciating Singapore nominal effective exchange rate (S$NEER) will also put a lid on imported costs, the economists added. Against this uncertain outlook, economists largely expect MAS to maintain its current policy stance in the upcoming July monetary policy meeting. Said Maybank's Dr Chua and Lee: 'Inflation remains contained, while growth is slowing to a more sustainable pace.' RHB's Gan and Raveenthar, however, believe rising volatility could prompt MAS to widen the S$NEER policy band, while maintaining the current appreciation slope. They also do not rule out the possibility of MAS flattening the slope of the policy band in future reviews, should trade tensions escalate again or if global demand slows more sharply than anticipated. 'While the headline and core inflation remain contained, the balance of risk has tilted towards the need to support growth, given rising external uncertainties,' said Gan and Raveenthar. The outlier was UOB's Koh, who expects MAS to flatten the S$NEER slope in the upcoming review. 'We assess that the economic outlook still warrants a further easing move,' said Koh, adding, however, that MAS may choose to delay monetary policy easing to the subsequent October policy meeting instead. 'Greater clarity could emerge with regard to tariff policy, the Middle East conflict and economic data (between July and the subsequent policy meeting in October), conferring the advantage for MAS to adjust monetary policy possibly with more comprehensive information.' Key CPI categories In May, most consumer price index (CPI) categories saw easing prices, except for accommodation and services inflation, which was unchanged from the month before. Food inflation eased to 1.1 per cent, from 1.4 per cent previously, as the prices of non-cooked food rose at a slower pace. Meanwhile, electricity and gas inflation fell further to 3.7 per cent, from a fall of 3.5 per cent, due to a larger decline in electricity prices. Retail and other goods prices continued to fall, but at a slower pace of 1 per cent, compared to a decline of 1.2 per cent previously, due to increases in the prices of household appliances, which offset a smaller decline in the cost of personal effects. Private transport inflation rose at a slower pace of 1.1 per cent, from 1.3 per cent previously, on the back of a smaller increase in car prices. Meanwhile, both services and accommodation inflation were unchanged from the previous month, at 1.1 per cent, respectively.
Straits Times
17-06-2025
- Business
- Straits Times
Singapore shares rise even as exports in May fall; STI up 0.6%
Across the broader market, advancers edged out decliners 275 to 210, after 1.2 billion securities worth $993.8 million were traded. PHOTO: ST FILE Singapore shares rise even as exports in May fall; STI up 0.6% SINGAPORE - Shares on the local bourse ended higher on Tuesday (Jun 17), even as Singapore's key exports declined 3.5 per cent year on year in May, reversing sharply from April's surge. The benchmark Straits Times Index (STI) rose 0.6 per cent or 22.18 points to close at 3,930.64. Across the broader market, advancers edged out decliners 275 to 210, after 1.2 billion securities worth $993.8 million were traded. The top gainer on the STI was CapitaLand Integrated Commercial Trust (CICT), which rose 1.9 per cent or $0.04 to $2.17. Telco giant Singtel was the biggest decliner, slipping 0.5 per cent or $0.02 to $3.93. The trio of local banks finished in positive territory. DBS rose 0.7 per cent or $0.30 to S$44.46, UOB edged up 0.4 per cent or $0.13 to $34.95, and OCBC climbed 0.4 per cent or $0.07 to $16.09. Elsewhere in Asia, markets ended on a mixed note. Hong Kong's Hang Seng Index slipped 0.3 per cent, Malaysia's FTSE Bursa Malaysia KLCI declined 0.6 per cent, and Australia's ASX 200 edged down 0.1 per cent. In contrast, South Korea's Kospi inched up 0.1 per cent, while Japan's Nikkei 225 gained 0.6 per cent. In Singapore, data released on Tuesday showed that its latest non-oil domestic exports (Nodx) print reversed from the preceding month's 12.4 per cent jump and disappointed market expectations of 7.8 per cent growth. Exports to most major trading partners declined, with both electronics and non-electronics shipments weakening. The data suggests some softening in earlier front-loading activity, noted UOB's global economics and markets research team in a report. The bank's associate economist Jester Koh wrote: 'The sluggish Nodx outturn in May did not come as a huge surprise given that there was some evidence that export activity to trading partners were slowing, such as the month-on-month contraction in South Korea's and Taiwan's imports from Singapore for the month of May.' In light of the weaker showing, UOB adjusted its full-year 2025 Nodx forecast downward to a range of 1 to 3 per cent growth, from the earlier projection of 2 to 4 per cent growth, to reflect recent developments. The bank noted reduced confidence in its projections, citing a fluid situation and heightened market attention on the potential impact of 'new' unilateral tariff rates. Koh also cautioned that the payback from earlier front-loading could result in 'a more protracted downturn in trade activity' in the second half of 2025 while 'escalating geopolitical tensions in the Middle East could further dampen business and consumer confidence'. THE BUSINESS TIMES Join ST's Telegram channel and get the latest breaking news delivered to you.
