Singapore flagged the chance of a technical recession attributable to international tariff tensions even after its economic system kick-started 2025 on a faster-than-expected notice.
Gross home product grew 3.9% within the three months by March from a yr earlier, the Ministry of Commerce and Business stated in its last estimate on Thursday. The determine compares with a median forecast of a 3.6% development in a Bloomberg survey of economists, and the federal government’s superior estimate of three.8%.
On a seasonally adjusted quarterly foundation, GDP fell 0.6%, versus a forecast of 1% contraction. The Singapore greenback and the benchmark Straits Occasions Index have been little modified following the report.
The MTI maintained a not too long ago downgraded forecast for 2025 GDP development at 0%-2% as U.S. tariffs clouded the outlook for international commerce. Prime Minister Lawrence Wong earlier warned {that a} recession can’t be dominated out.
“A technical recession the place you’ve two quarters of consecutive quarter-to-quarter destructive development, that could be a risk,” Beh Swan Gin, everlasting secretary on the commerce ministry, informed reporters. “That doesn’t essentially equate to a full-blown financial recession” as seen within the year-on-year GDP numbers.
The final time Singapore had a technical recession was on the peak of the COVID-19 pandemic in 2020. Previous to that the city-state had 4 straight quarterly contractions from the June quarter of 2008.
The higher-than-expected consequence within the first quarter was pushed by manufacturing and export exercise as companies rushed to keep away from the imposition of upper U.S. tariffs.
That momentum is now at “danger of fading,” stated Charu Chanana, the chief funding strategist at Saxo Markets, including that “fiscal buffers and proactive policymaking in Singapore provide room to cushion any exterior shocks.”
The info reveals how the U.S.-China commerce warfare and China’s sluggish restoration have been seeping deeper into the area initially of the yr. Since then, the world’s two largest economies have referred to as a truce, agreeing to a 90-day negotiating window beneath which they’ve lowered tariffs on one another’s items.
“The worldwide financial outlook stays clouded by vital uncertainty, with the dangers tilted to the draw back,” Beh stated.
The uncertainty might result in a larger-than-expected pullback in financial exercise, he stated, including {that a} re-escalation of tariff actions could set off a full-blown international commerce warfare. He additionally warned that disruptions to the worldwide disinflation course of and recession dangers might destabilize capital flows.
Towards this background, the expansion of “outward-oriented sectors” akin to manufacturing, wholesale commerce, transportation and storage, is predicted to sluggish this yr. Finance and insurance coverage sectors are additionally prone to be weighed down by weaker buying and selling exercise whereas the outlook for consumer-facing sectors is lackluster.
With commerce accounting for about 3 times its GDP, Singapore stays acutely uncovered to any sustained slowdown in international commerce. The commerce ministry stated it can regulate its development forecast as wanted.
The Financial Authority of Singapore will make a “complete evaluation” within the run-up to its July coverage assembly, MAS Deputy Managing Director Edward Robinson stated on the similar briefing.
“The coverage stance stays applicable as of now,” he stated.
Final month, the MAS eased its financial coverage settings for the second time this yr.
Bloomberg Economics expects a 0.9% development this yr, although it sees some upside danger from the 90-day U.S.-China commerce truce. One other supportive issue for Singapore was the result of this month’s election.
“The robust displaying of Singapore’s ruling Individuals’s Motion Social gathering within the normal election on Might 3 reduces uncertainty at a essential juncture—as companies and buyers navigate U.S. President Donald Trump’s upending of worldwide commerce and safety relationships,” stated Tamara Mast Henderson, ASEAN economist for Bloomberg Economics.
This story was initially featured on Fortune.com
