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Business Times
22-05-2025
- Business
- Business Times
Economists split over risk of technical recession, after revised Singapore Q1 growth beats market expectations
[SINGAPORE] Private-sector economists remain split over the risk of Singapore entering a technical recession, with some raising their full-year forecasts after Q1 growth came in better than expected. Singapore's gross domestic product grew 3.9 per cent year on year in Q1, revised up marginally from the advance estimate of 3.8 per cent, Ministry of Trade and Industry (MTI) figures indicated on Thursday (May 22). Though it was a slowdown from the previous quarter's 5 per cent growth, it surpassed economists' expectations of 3.6 per cent. MTI maintained its forecast range of 0 to 2 per cent. Most economists also kept theirs, but two banks – Maybank and UOB – upgraded their forecasts. On a quarter-on-quarter seasonally adjusted basis, the economy shrank 0.6 per cent, reversing from Q4's 0.5 per cent growth. Though less than the 0.8 per cent contraction in the advance figures, this still paves the way for a technical recession, which MTI permanent secretary Dr Beh Swan Gin acknowledged as 'a possibility' at Thursday's briefing. 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 Staying cautious In maintaining its forecast, MTI said Singapore's external demand outlook for the rest of the year has 'improved slightly' with a de-escalation of US-China trade tariffs – but the global outlook remains clouded by uncertainty, with risks tilted to the downside. Dr Beh said: 'Given the heightened uncertainty, MTI will continue to monitor developments closely, and make adjustments to the forecast as necessary in the coming quarters.' Most economists similarly remained cautious amid uncertainty. RHB analysts Barnabas Gan and Laalitha Raveenthar maintained their 2025 growth forecast at 2 per cent. For them, ongoing US-China trade talks limit the downside risk of growth being in the lower 0.5 to 1 per cent range. Still, they warned: 'Although recent advances in US-China negotiations provide encouraging signals of easing tensions, we urge continued vigilance and caution against premature optimism.' They expect Singapore to enter a technical recession in Q2 with a contraction of 2.4 per cent on a quarter-on-quarter seasonally adjusted basis. OCBC chief economist Selena Ling similarly kept her growth forecast at 1.6 per cent and expects a technical recession in Q2 on a quarterly contraction of 0.3 per cent, with year on year growth slowing further to 2.5 per cent. Despite positive developments such as the 90-day pause on reciprocal tariffs, an initial US-UK trade deal and the 90-day US-China tariff truce, 'some damage to business and consumer confidence has already been done', she said. DBS senior economist Chua Han Teng maintained his 2 per cent forecast for full-year growth, but sees a chance of avoiding a technical recession. With exports being front-loaded during the 90-day reciprocal tariff pause, the boost to Singapore's trade-related sectors 'could be sufficient' to avoid a technical recession in Q2, he said. However, such front-loading 'will eventually be followed by a payback through decelerating trade and production' in the second half of the year. Optimistic for now MTI noted that Q1 growth was largely driven by Singapore's wholesale trade, manufacturing as well as finance and insurance sectors – with the first two likely to have been partly supported by front-loading. Exporters could continue to adopt front-loading as a hedging strategy, allowing for 'bouts of resilience' in Singapore's growth momentum, said UOB associate economist Jester Koh. He raised his full-year forecast to 1.7 per cent, from 1.5 per cent before. But in turn, he lowered his 2026 growth forecast to 1.4 per cent, from 1.6 per cent before. This is as payback effects could result in an 'even more protracted downturn in trade and manufacturing activity' late in the second half of 2025, and into the first half of 2026. Maybank economists Chua Hak Bin and Brian Lee upgraded their full-year forecast to 2.4 per cent – above MTI's forecast range – from 2.1 per cent previously. They expect a growth slowdown in the second half, as opposed to a recession or sharp downturn. This is as front-loading continues into Q3, while the tariff shocks are also cushioned by a construction boom, falling interest rates and fiscal support. Safe-haven flows will also support Singapore's financial and real estate activities. Sectoral outlook For the rest of the year, MTI expects the growth of outward-oriented sectors to slow, particularly as US tariff measures hurt manufacturing. The manufacturing slowdown, alongside weaker global trade, will weigh on trade-related services sectors such as wholesale trade; transportation and storage; and finance and insurance. Worsening business expectations will likely cause companies to cut back on discretionary spending, dampening the growth of the information and communications as well as professional services sectors. Finally, growth in consumer-facing sectors such as retail trade as well as food and beverage services is likely to remain lacklustre, as locals continue to spend abroad and domestic labour market conditions weaken. This follows a Q1 in which the outward-oriented sectors generally had year-on-year growth but quarterly contraction. Manufacturing growth slowed to 4 per cent, from 7.4 per cent before. Growth was mainly driven by the electronics, precision engineering and transport engineering clusters. But on a quarterly basis, the sector shrank 5.8 per cent, weakening from flat growth before. Construction grew 5.5 per cent, up from 4.4 per cent before. But sequentially, it contracted 1.4 per cent, reversing Q4's 0.3 per cent expansion. The wholesale trade sector grew 4.2 per cent year on year, slowing from 6.7 per cent. But it shrank 0.4 per cent quarter on quarter, reversing from Q4's 0.9 per cent growth. For domestic-oriented services, retail trade grew by a marginal 0.1 per cent, accommodation shrank 0.9 per cent, and food and beverage services shrank 0.2 per cent. In contrast, growth accelerated for several services sectors: to 5.2 per cent for transportation and storage; to 7.1 per cent for real estate; to 1.4 per cent for professional services; to 4.4 per cent for information and communications; and to 2.8 per cent for administrative and support services. Other services industries grew 1.1 per cent, slowing from 3.1 per cent the previous quarter.
The Sun
22-05-2025
- Business
- The Sun
Singapore sees technical recession risk after Q1 contraction
SINGAPORE: Singapore could slip into a technical recession this year, a government official said on Thursday after final GDP data confirmed the city-state's economy had contracted in the first quarter even before US tariffs were announced. The trade-driven economy grew by 3.9% in the first three months of 2025 from the same period a year earlier, the trade ministry said. On a seasonally adjusted basis, the economy contracted by 0.6% in the January-March quarter. It was possible that Singapore could enter a technical recession, defined as two consecutive quarters of contraction, Beh Swan Gin, the permanent secretary at the trade ministry, told a press conference. 'However, that doesn't necessarily equate to full-blown economic recession, which will be, of course, year-on-year numbers,' he added. The ministry maintained its growth forecast for 2025 at 0.0% to 2.0%, after last month cutting it from 1.0% to 3.0% following the US announcement of global tariffs. While recent moves to reduce trade tensions had slightly improved Singapore's external demand outlook, the environment remained challenging, the ministry said in a statement. 'The global economic outlook remains clouded by significant uncertainty, with the risks tilted to the downside,' it said. Monetary Authority of Singapore deputy managing director Edward Robinson told the press conference that the central bank's policy stance remained appropriate. The MAS eased policy at reviews in January and April this year. Maybank economist Chua Hak Bin expected the MAS to maintain current policy settings at its July review, as growth appeared resilient and early second quarter data has been encouraging. 'The probability of a MAS shift to a neutral bias seems higher in 2026 than 2025 if a recession scenario does unfold as front-loading dissipates and the US-China trade war re-escalates,' he said. Singapore has previously warned of the risk of a recession and job losses due to the fallout from US tariffs, with the trade minister last week saying the growth forecast may need to be further adjusted. Despite having a free-trade agreement and running a trade deficit with the United States, the wealthy financial hub has been slapped with a 10% baseline tariff rate by Washington. Other Southeast Asian countries have been threatened with much higher tariffs, although they have been delayed until July and an interim 10% tariff is in place for now. There will also be indirect impacts on Singapore, one of the world's most open economies and a shipping hub, if the US tariffs constrict global trade.
South China Morning Post
22-05-2025
- Business
- South China Morning Post
Singapore warns of technical recession risk from US tariff tensions
Singapore flagged the risk of a technical recession due to global tariff tensions even after its economy kick-started 2025 on a faster-than-expected note. Gross domestic product grew 3.9 per cent in the three months through March from a year earlier, the Ministry of Trade and Industry said in its final estimate on Thursday. The figure compares with a median forecast of a 3.6 per cent growth in a Bloomberg survey of economists, and the government's advanced estimate of 3.8 per cent. On a seasonally adjusted quarterly basis, GDP fell 0.6 per cent, versus a forecast of 1 per cent contraction. The MTI maintained a recently downgraded forecast for 2025 GDP growth at 0 per cent-2 per cent as US tariffs clouded the outlook for global trade. Prime Minister Lawrence Wong earlier warned that a recession cannot be ruled out. 'A technical recession where you have two quarters of consecutive quarter-to-quarter negative growth, that is a possibility,' Beh Swan Gin, permanent secretary at the trade ministry, told reporters. 'However, that doesn't necessarily equate to a full-blown economic recession' as seen in the year on year GDP numbers. First quarter's better-than-expected result was driven by manufacturing and export activity as businesses rushed to avoid the imposition of higher US tariffs. The data shows how the US-China trade war and China's sluggish recovery were seeping deeper into the region at the start of the year. Since then, the world's two biggest economies have called a truce, agreeing to a 90-day negotiating window under which they have lowered tariffs on each other's goods.
Business Times
22-05-2025
- Business
- Business Times
Singapore keeps 2025 growth forecast despite easing US-China tensions, upward revision of Q1 growth
[SINGAPORE] Despite first-quarter growth coming in marginally higher than advance estimates, the Ministry of Trade and Industry (MTI) maintained its 2025 full-year forecast range at 0 to 2 per cent. Singapore's external demand outlook for the rest of the year has 'improved slightly' with a de-escalation of US-China trade tariffs, yet the global outlook remains clouded by uncertainty and risks are tilted to the downside, said MTI on Thursday (May 22) morning. With Q1 gross domestic product shrinking sequentially, a technical recession – two straight quarters of contraction – 'is a possibility', said MTI permanent secretary Dr Beh Swan Gin at a press briefing. But he noted that this may not mean a 'full-blown economic recession', which depends on year-on-year figures. For Q1, year-on-year growth was revised upwards to 3.9 per cent, marginally higher than the advance estimate of 3.8 per cent, but moderating from the 5 per cent growth in the fourth quarter of 2024. The economy shrank 0.6 per cent on a quarter-on-quarter seasonally adjusted basis, reversing from Q4's 0.5 per cent growth. Though less than the 0.8 per cent contraction in the advance figures, this still paves the way for a potential technical recession. 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 With the release of advance Q1 figures in April, MTI downgraded its full-year growth forecast range to between 0 and 2 per cent, from between 1 and 3 per cent previously. That downgrade was due to a 'significant deterioration' in Singapore's external demand outlook with the intensifying US-China tariff war, which was expected to hit global trade and growth. Dr Beh said: 'Given the heightened uncertainty, MTI will continue to monitor developments closely, and make adjustments to the forecast as necessary in the coming quarters.' Asked if MTI may hold back on upward revisions to forecasts as trade tensions could flare up again, he replied that it was 'premature' to comment, as much depends on what sort of agreement the US strikes with major trading partners. On Thursday, MTI noted that the US has been in trade talks with several economies affected by its tariffs, including China. The US and China have also agreed to slash tariffs for 90 days from May 14. 'Given the steps taken by major economies to de-escalate global trade tensions, MTI's assessment is that Singapore's external demand outlook for the rest of the year has improved slightly compared to April,' the ministry said. However, it flagged three downside risks. First, elevated economic uncertainty may cause a 'larger-than-expected' pullback in economic activity, as households and businesses take a wait-and-see approach. Second, a re-escalation in tariff actions could cause a 'full-blown' global trade war and a sharper slowdown. Third, disruptions to the global disinflation process and recession risks could destabilise capital flows, triggering 'latent vulnerabilities' in banking and financial systems. Sectoral outlook MTI noted that Q1 growth was largely driven by Singapore's wholesale trade, manufacturing as well as finance and insurance sectors – with the first two likely to have been partly supported by front-loading ahead of anticipated US tariff hikes. For the rest of the year, MTI expects the growth of outward-oriented sectors to slow. 'In particular, the US' tariff measures are likely to adversely affect the manufacturing sector given its export exposure to the US market, as well as slowing growth in global end-markets.' But within the sector, transport engineering remains a bright spot, especially given the shift towards higher value-added aircraft maintenance, repair and overhaul works in Singapore. The manufacturing slowdown, alongside weaker global trade, is expected to weigh on trade-related services sectors such as wholesale trade; transportation and storage; and finance and insurance. Worsening business expectations will likely cause companies to cut back on discretionary spending, dampening the growth of the information and communications as well as professional services sectors. Finally, growth in consumer-facing sectors such as retail trade as well as food and beverage services is likely to remain lacklustre, as locals continue spending abroad and domestic labour market conditions weaken. Sectoral performance In Q1, outward-oriented sectors generally had year-on-year growth but quarterly contraction. Manufacturing growth slowed to 4 per cent year on year, moderating from 7.4 per cent in the previous quarter. Growth was mainly driven by the electronics, precision engineering and transport engineering clusters. The sector shrank 5.8 per cent quarter on quarter, weakening from flat growth before. Construction grew 5.5 per cent, up from 4.4 per cent in the previous quarter, with increases in both public and private-sector construction output. Sequentially, the sector contracted 1.4 per cent, reversing Q4's 0.3 per cent expansion. The wholesale trade sector grew 4.2 per cent year on year, slowing from 6.7 per cent the previous quarter. Growth was led by the machinery, equipment and supplies segment, with the fuels and chemicals segment and the 'others' segment also expanding. But the sector shrank 0.4 per cent quarter on quarter, reversing from Q4's 0.9 per cent growth. For domestic-oriented services, retail trade grew by a marginal 0.1 per cent, accommodation shrank 0.9 per cent, and food and beverage services shrank 0.2 per cent. In contrast, growth accelerated for several services sectors: to 5.2 per cent for transportation and storage; to 7.1 per cent for real estate; to 1.4 per cent for professional services; to 4.4 per cent for information and communications; and to 2.8 per cent for administrative and support services. Other services industries grew 1.1 per cent, slowing from 3.1 per cent the previous quarter.
Reuters
22-05-2025
- Business
- Reuters
Singapore could enter technical recession, trade ministry official says
SINGAPORE, May 22 (Reuters) - Singapore could enter a technical recession, marked by two quarters of contraction, but the economy may not necessarily suffer a full-blown recession, Beh Swan Gin, Permanent Secretary at the Trade Ministry, said on Thursday after the release of GDP data. Edward Robinson, Deputy Managing Director at the Monetary Authority of Singapore, said current policy settings remained appropriate. The MAS eased policy at reviews in January and April.
