[SINGAPORE] Private-sector economists warned that Singapore could slip into a technical recession this year, as the escalating trade war between the United States and China is expected to weigh heavily on global growth.
This comes after Singapore downgraded its official growth forecast to “0 to 2 per cent”, from a range of 1 to 3 per cent, as its external demand outlook has “weakened significantly” due to US President Donald Trump’s tariff regime. The lowered forecast also prompted some economists to cut their full-year gross domestic product estimates for 2025.
“Although there has been a temporary 90-day pause in the implementation of the higher reciprocal tariffs, except for China, the tariff war between the US and China has intensified, with an escalating cycle of tit-for-tat tariffs being imposed by both sides,” said the Ministry of Trade and Industry (MTI) on Monday (Apr 14).
Assuming that the trade war sees no near-term improvements, Singapore’s economy could contract again sequentially in the second quarter, said Ling, after it shrank 0.8 per cent in the first quarter, based on advance estimates released on Monday. This would bring the economy into a technical recession.
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With GDP likely to sink further in the second half due to last year’s high base, OCBC slashed its full-year growth forecast to “closer to 1.6 per cent year on year”, from 2.1 per cent previously.
Citi economist Kit Wei Zheng downgraded his full-year forecast as well to 1.4 per cent for 2025, and 1.2 per cent for 2026, from 2 per cent for each year previously. This assumes a “mild three-quarter technical recession”, with a 0.3 per cent quarter-on-quarter contraction on average between the third quarter of this year and Q1 of 2026.
Standard Chartered economists Edward Lee and Jonathan Koh also lowered their growth forecast for 2025 to 1 per cent from 2.5 per cent previously, and that for 2026 to 1.9 per cent from 2.3 per cent earlier.
Meanwhile, Barclays analysts Brian Tan, Liu Hongying and Audrey Ong slashed their 2025 growth forecast to 0.2 per cent, from 1.7 per cent previously, closer to the bottom end of the official forecast range. For 2026, the analysts are expecting a slight 0.3 per cent contraction, versus a 0.5 per cent expansion previously.
DBS analysts Chua Han Teng and Philip Wee lowered their growth forecast to 2 per cent for 2025 and 1.8 per cent for 2026, from 2.8 per cent and 2.5 per cent, respectively.
Sectoral growth
In Q1, Singapore’s economy grew 3.8 per cent year on year, slower than the 5 per cent growth recorded in the previous quarter and disappointing private-sector economists’ median expectations of 4.5 per cent growth, according to a Bloomberg poll.
“GDP growth is expected to slow in the coming quarters as the manufacturing and trade-related services sectors are weighed down by uncertainty and shocks from the global trade war,” said Maybank economists Chua Hak Bin and Brian Lee.
“However, a reprieve on most countries’ reciprocal tariffs and diversion of trade and financial flows may cushion the blow,” they added. “Domestically, falling interest rates, a construction boom and more fiscal support will help support growth.”
Manufacturing growth slowed to 5 per cent year on year in Q1, down from the 7.4 per cent expansion in the previous quarter. Output expansions were recorded in all clusters except for chemicals and general manufacturing.
Dr Chua and Lee of Maybank said that the Q1 out-turn implies that manufacturing output climbed 7.9 per cent from a year ago, suggesting some front-loading of activity in March to get ahead of the US’ reciprocal tariff announcement in April.
Sequentially, the manufacturing sector contracted by 4.9 per cent, after growth was flat in the previous quarter.
Construction grew by 4.6 per cent year on year in Q1, a slight acceleration from the previous quarter’s 4.4 per cent growth. This was due to an increase in both public and private-sector construction output, said MTI.
The sector fell 2.3 per cent quarter on quarter, a pullback from the fourth quarter’s 0.3 per cent expansion.
On the whole, the services sectors expanded 3.4 per cent year on year, moderating from the 4.6 per cent growth previously. Sequentially, it recorded 0.3 per cent growth, slowing down from Q4’s 0.9 per cent increase.
Within services, the wholesale and retail trade sector, along with the transportation and storage sector, grew 4.2 per cent on the year, decelerating from the 5.6 per cent growth in Q4.
On a quarter-on-quarter basis, the sector expanded 0.5 per cent, rebounding from the 0.1 per cent contraction in the previous quarter.
Meanwhile, the information and communications, finance and insurance, and professional services sectors collectively rose 3 per cent in Q1, from 4.4 per cent previously. Sequentially, however, the cluster shrank 5 per cent, reversing from Q4’s 5.9 per cent expansion.
The group of services comprising accommodation and food, real estate, administrative and support, and other services grew 2.5 per cent, the same as in Q4. On a quarter-on-quarter basis, it grew 1.4 per cent, quicker than the previous quarter’s 0.3 per cent growth.
