Singapore has revised its economic growth forecast for 2024 upward, citing a stronger-than-expected recovery, but officials have urged caution as global risks loom for the following year. The Ministry of Trade and Industry (MTI) upgraded the city-state’s projected growth for this year to 3.5%, compared to its earlier estimate of 2%-3%.
However, the ministry also flagged potential headwinds for 2025, including anticipated global trade disruptions tied to a possible re-election of Donald Trump as U.S. president. The revised forecast underscores Singapore’s economic resilience as it emerges from pandemic-induced slowdowns and adjusts to global economic shifts.
The government now expects next year’s growth to land in the range of 1%-3%, reflecting heightened uncertainties stemming from geopolitical tensions and trade frictions. The announcement was accompanied by improved economic data for the third quarter. Singapore’s gross domestic product (GDP) grew by 3.2% quarter-on-quarter from July to September, surpassing both the preliminary estimate of 2.1% and economists’ consensus of 2.7%. On a year-on-year basis, the economy expanded by 5.4%, significantly higher than the prior official estimate of 4.1%.
“This upgrade in growth reflects the broad-based recovery in key sectors, bolstered by external demand and a pickup in domestic activities,” the MTI stated.
The stronger-than-expected performance came as Singapore continued to benefit from robust demand in manufacturing and services, even as it faced challenges from rising inflation and global uncertainties.
The possibility of Donald Trump returning to the U.S. presidency has emerged as a critical factor shaping Singapore’s cautious outlook for 2025. Trump’s history of imposing tariffs and protectionist policies could weigh heavily on global trade dynamics.
“While Trump is likely to impose tariffs across the world, the U.S. enjoys a trade surplus with Singapore, so that is a positive for us,” said Beh Swan Gin, permanent secretary at the MTI.
The United States accounts for 10% of Singapore’s total trade and 20% of foreign investment in the city-state. This economic relationship might buffer Singapore against some of the more adverse impacts of U.S. tariffs, but officials remain vigilant.
“The escalation of trade tensions could disrupt supply chains and exacerbate inflation pressures,” the MTI added.
Global challenges extend beyond trade policy. The MTI highlighted concerns about geopolitical conflicts, including ongoing crises in the Middle East and Ukraine, which could lead to further economic instability. Rising oil prices, in particular, were singled out as a potential risk, given Singapore’s heavy reliance on energy imports.
“Disruptions to the global disinflation process could lead to tighter financial conditions for longer,” the ministry stated. This could amplify vulnerabilities in the financial sector and strain economies worldwide.
Singapore’s central bank, the Monetary Authority of Singapore (MAS), has sought to navigate these risks carefully. The MAS, which uses the exchange rate as its primary tool to manage inflation, opted to keep monetary policy settings unchanged in its most recent review.
The central bank has been closely monitoring the trajectory of inflation, which it described as “well entrenched” in a disinflationary pattern, albeit with lingering risks. Core inflation, which excludes volatile items like food and energy, has remained elevated. October’s consumer price data, due next week, is expected to provide further insights into the effectiveness of these measures.
Singapore’s economic rebound has been driven by a mix of manufacturing, finance, and consumer-facing services:
Manufacturing: Despite global supply chain challenges, the electronics and biomedical sectors have shown resilience. Demand for semiconductors, in particular, has bolstered export performance.
Services: Tourism, retail, and transportation sectors have benefited from the reopening of borders and easing of pandemic restrictions.
Construction: Infrastructure projects and private developments have provided a steady boost, though rising costs remain a concern.
Singapore’s economic trajectory reflects broader trends in Asia, where many economies are grappling with mixed signals of recovery. While China’s slowdown has created ripple effects, robust demand in India and Southeast Asia has partially offset these pressures.
Still, Singapore’s open economy leaves it particularly vulnerable to external shocks. Trade tensions, tighter financial conditions, and geopolitical conflicts could disrupt its progress.
The government’s revised forecast signals confidence in Singapore’s short-term recovery, but businesses are urged to brace for volatility. Companies reliant on international trade may need to diversify supply chains and explore regional markets to mitigate risks associated with U.S.-China tensions and potential tariffs.
For policymakers, maintaining economic stability in 2025 will likely require a delicate balancing act. Targeted fiscal measures, continued infrastructure investment, and proactive monetary policies will be essential in navigating uncertainties.
The MTI’s cautious tone for 2025 reflects an acknowledgment of the complex interplay of global factors. A resurgence in trade protectionism, combined with high energy costs and financial instability, could dampen global growth and disrupt Singapore’s recovery momentum.
As the world enters an era of heightened geopolitical and economic turbulence, Singapore’s strategic adaptability will be tested. However, the city-state’s robust institutions, diversified economy, and strong trade partnerships provide a solid foundation to weather the storm.
