Singapore Downgrades Growth Forecast Amidst Trade War Concerns

Singapore has downgraded its 2025 gross domestic product (GDP) growth forecast to a range of 0 to 2 percent, according to the Ministry of Trade and Industry (MTI). This revision reflects concerns about the impact of US President Donald Trump's tariffs on global trade and the resulting economic uncertainties. The Monetary Authority of Singapore (MAS) has also responded by easing monetary policy for the second consecutive time, further indicating the economic challenges ahead.

The US has implemented a baseline tariff of 10 percent on imports from all countries, with higher tariffs directed at nations with significant trade surpluses. These tariffs, coupled with the ongoing trade war between the US and China, are anticipated to significantly hinder global trade and economic expansion. This is expected to negatively affect the growth outlook for economies within the region, leading to a decrease in external demand. Furthermore, domestic consumption and investment in many economies are likely to be dampened.

Singapore's economy experienced a growth of 3.8 percent in the first quarter of 2025, a slower pace compared to the 5 percent growth recorded in the previous quarter. On a quarter-on-quarter basis, the economy contracted by 0.8 percent, contrasting with the 0.5 percent growth in the fourth quarter of 2024. While the US has temporarily paused the imposition of higher tariffs on most trading partners, Singapore remains subject to the baseline 10 percent rate.

The trade war between the US and China has intensified, with China increasing duties on US goods. This has led to a deterioration in the growth outlook for both countries. The MTI has identified substantial downside risks, including a potential decline in consumer spending, increased costs, and disruptions to global supply chains, all of which are contributing to heightened recession fears. These risks include a pullback in economic activity due to uncertainty, the potential for a full-blown global trade war, and disruptions to the global disinflation process.