Singapore’s Growth to Surprise Positively: Aug. 13, 2025

Global trade uncertainty has eased modestly but it continues to overshadow optimism for Singapore’s economy, despite the island-nation’s gross domestic product (GDP) growing 1.4% quarter over quarter (q/q) from April through the end of June and the Ministry of Trade and Industry (MTI) upgrading its forecast for the full year. In my view, however, the MTI’s outlook is conservative and the nation is poised to expand at an even faster pace. The organization recently said it expects 2025 GDP growth to range from 1.5% to 2.5%, an increase from its previous estimate of 0% to 2%. When considering the strength of the country’s labor market, Singapore’s room to ease monetary policy further due to weak inflation and its lighter-than-average tariff rate on exports to the US, I believe an upside surprise with GDP coming in around 3.2%, is in the cards.

Second Quarter Rebound Was Fierce

Singapore avoided a technical recession in the second quarter by reversing from the 0.5% q/q decline experienced in the January through March period. On a year-over-year basis, GDP was up 4.4%, surpassing the 4.3% from the advance estimate and accelerating from the 4.1% print of the first three months of this year. Front-loading of purchases from US buyers to avoid tariffs provided a significant contribution to the recent results.

Trade Uncertainty Is Likely Behind Us

In revising its growth estimate update, the MTI cited the strong second-quarter results and mentioned that recent US trade deals with the Eurozone, Japan, South Korea, and several Southeast Asian nations have eased tensions. Despite the MTI cautioning that “the economic outlook for the rest of the year remains clouded by uncertainty, with the risks tilted to the downside,” we believe activity may be stronger than the organization’s projection for the following reasons:

• President Trump has imposed a 10% tariff on Singapore imports, giving the country a competitive advantage relative to its Southeast Asia neighbors that face significantly higher levies. As a leading manufacturing of electronics and hi-tech computer items that are in high demand due to artificial intelligence, this factor is considerable.
• Singapore’s strong labor market is likely to support domestic consumption and business investment. During the second quarter, for example, the country’s unemployment rate was a very low 2.1%, up only slightly from 2%. Its labor market is also quite stable with the level of joblessness remaining below 2.4% since the final quarter of 2021.

Inflation is Low, Offering Space to the MAS

The country also has room to ease financial conditions, thanks to benign inflation. In June, the Singapore Consumer Price Index was up only 0.8% year over year and relative to May, it was down -0.1%. The island-nation adjusts its monetary policy by changing the Dollar Nominal Effective Exchange Rate (S$NEER), which is an allowed range for its currency to trade against a basket of tenders issued by its major cross-border commerce partners. Having already eased for the second time this year in April, I expect the Monetary Authority to offer additional accommodation in the coming months, featuring a lighter slope in response to softening cost pressures and international uncertainty.