Singapore flagged the chance of a technical recession as a consequence of international tariff tensions even after its financial system kick-started 2025 on a faster-than-expected be aware.
Gross home product grew 3.9% within the three months by way of March from a yr earlier, the Ministry of Commerce and Business mentioned in its remaining estimate on Thursday. The determine compares with a median forecast of a 3.6% progress 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 Instances Index had been little modified following the report.
The MTI maintained a just lately downgraded forecast for 2025 GDP progress 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 where you have two quarters of consecutive quarter-to-quarter negative growth, that is a possibility,” Beh Swan Gin, everlasting secretary on the commerce ministry, informed reporters. “That doesn’t necessarily equate to a full-blown economic 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 outcome 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 “risk of fading,” mentioned Charu Chanana, the chief funding strategist at Saxo Markets, including that “fiscal buffers and proactive policymaking in Singapore offer room to cushion any external shocks.”
The info exhibits how the U.S.-China commerce conflict and China’s sluggish restoration had been seeping deeper into the area at the beginning of the yr. Since then, the world’s two greatest economies have known as a truce, agreeing to a 90-day negotiating window underneath which they’ve lowered tariffs on one another’s items.
“The global economic outlook remains clouded by significant uncertainty, with the risks tilted to the downside,” Beh mentioned.
The uncertainty might result in a larger-than-expected pullback in financial exercise, he mentioned, including {that a} re-escalation of tariff actions might set off a full-blown international commerce conflict. He additionally warned that disruptions to the worldwide disinflation course of and recession dangers might destabilize capital flows.
In opposition to this background, the expansion of “outward-oriented sectors” equivalent to manufacturing, wholesale commerce, transportation and storage, is anticipated 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 mentioned it would modify its progress forecast as wanted.
The Financial Authority of Singapore will make a “comprehensive assessment” within the run-up to its July coverage assembly, MAS Deputy Managing Director Edward Robinson mentioned on the similar briefing.
“The policy stance remains appropriate as of now,” he mentioned.
Final month, the MAS eased its financial coverage settings for the second time this yr.
Bloomberg Economics expects a 0.9% progress 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 end result of this month’s election.
“The strong showing of Singapore’s ruling People’s Action Party in the general election on May 3 reduces uncertainty at a critical juncture—as businesses and investors navigate U.S. President Donald Trump’s upending of global trade and security relationships,” mentioned Tamara Mast Henderson, ASEAN economist for Bloomberg Economics.
This story was initially featured on Fortune.com
