15-07-2025
MAS flags subdued H2 outlook amid tariff risks, warns of softer demand ahead
[SINGAPORE] The Monetary Authority of Singapore (MAS) is taking a 'cautious' view of the outlook for the second half of 2025, amid 'considerable uncertainty' and a 'wider than usual' range of potential outcomes.
'We take a cautious view of the outlook, and our base case is that global economic activity will slow in H2 2025, with inflation dampened for the year,' said Chia Der Jiun, managing director of MAS.
Speaking at a media conference on Tuesday (Jul 15) for the release of the central bank's latest annual report, Chia said its mandate to secure medium-term price stability would serve as an 'anchor of stability' for the Singapore economy during this time of 'uncertainty and fundamental change'.
At present, the impact of US tariffs has 'yet to assert in a major way', he noted.
'Tariff deadlines have been rolled back, while businesses have front-loaded orders ahead of threatened tariff increases.
'For now, economic activity and output have been resilient, but front-loading will not continue indefinitely and will have to be paid back.'
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Chia added that consumption and investment will likely soften in the coming months, in line with forward-looking consumer and business confidence surveys, which are slipping.
Flash estimates released by the Ministry of Trade and Industry on Monday showed Singapore's economy grew 4.3 per cent year on year in the second quarter of 2025, exceeding consensus expectations.
Chia attributed part of this to the trade-related sector, which benefited from deferred tariff implementation and front-loading of exports.
However, he expects US tariffs to weigh on production and exports with a lag in H2, especially as the front-loading boost fades.
'Overall, Singapore's gross domestic product growth is expected to be subdued over the rest of the year,' he said.
Inflation is expected to remain subdued as well, with global demand weakness and the diversion of excess global goods production exerting downward pressure on imported prices.
Chia said domestic cost pressures will likely ease as economic activity slows and some slack emerges in the economy, though inflation could be firmed slightly by the lagged pass-through of earlier administrative cost increases.
He deferred a question on MAS' upcoming monetary policy stance to the next policy statement, which is due by the end of July.
Stronger Singdollar
On the Singapore dollar's recent strength, Chia said the appreciation of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) was 'broad-based' and occurred in the context of US dollar weakness.
Year to date, the Singapore dollar has appreciated 6.2 per cent against the greenback.
Under the Republic's monetary policy framework, the S$NEER is allowed to fluctuate within an undisclosed policy band, with adjustments made to the band's slope, level or width as needed to maintain price stability.
'We've been able to manage it within the policy band, and we should continue to be able to do so,' said Chia.
On the domestic financial system, MAS' stress tests show that Singapore's banks have strong capital buffers and healthy liquidity profiles, even under a 'more severe' scenario applied by the central bank this year.
They 'should weather a global recession and tightened financial conditions, for an extended period', Chia said.
Corporates and households also remain 'generally resilient', with healthy debt servicing capacities and financial buffers.
Even so, smaller firms in export-facing sectors may face revenue and liquidity risks as orders decline, and 'should take steps early' to build liquidity buffers and diversify revenue, including by tapping the Business Adaptation Grant.
'Similarly, households with less stable incomes should plan their finances prudently and avoid taking on large new loan commitments during this period of uncertainty,' he said.
