tl;dr
Singapore narrowly avoided a technical recession in Q2 2025 with 1.4% economic growth, exceeding expectations and rebounding from Q1's contraction. Growth was driven by manufacturing, services, and construction sectors, partly due to companies accelerating export orders ahead of new US trade tariffs...
Singapore narrowly avoided a technical recession in Q2 2025 as its economy grew by 1.4% on a seasonally adjusted annualized basis, surpassing economists' expectations of 0.8% growth. This marked a recovery from the previous quarter's 0.5% contraction and reflected a 4.3% increase in GDP compared to the same period last year. The growth was mainly driven by resilient manufacturing and services sectors, with companies accelerating export orders ahead of new US trade tariffs implemented on August 1.
Selena Ling of OCBC Bank attributed the quarterly rebound to "front-loading effects," where businesses rushed to fulfill orders before tariffs took effect, though she warned that the economy might lose momentum once the tariffs are fully implemented. The Monetary Authority of Singapore (MAS) had previously signaled concerns over a possible technical recession, but the latest data have eased those worries for the time being.
The construction sector also played a vital role in the recovery, expanding by 4.4% in Q2 after a modest 1.8% growth in Q1. This surge was largely due to increased public sector infrastructure projects aimed at cushioning the economy amid global trade uncertainties. Services-producing industries grew 4.8% year-on-year, benefiting in part from pre-tariff demand surges in sectors like wholesale trade, finance, and logistics.
Singapore’s economic dependence on trade remains a double-edged sword, as combined trade volumes are roughly three times the size of its GDP. While front-loading boosted short-term growth, experts like Khoon Goh from ANZ foresee a slowdown in momentum during the latter half of the year. Nonetheless, the robust GDP figures reduce the likelihood of immediate monetary policy changes this month.
Looking ahead, economists express caution about the second half of 2025 amid rising protectionism, weakening demand, and unclear US trade policies. Although Singapore avoided the harshest US tariffs imposed on some ASEAN neighbors, any sustained decline in global trade could adversely affect its open economy. The MAS is expected to maintain a cautious stance, favoring minimal policy shifts unless global conditions worsen significantly.
Bloomberg Economics ASEAN economist Tamara Mast Henderson predicts a challenging period ahead as the benefits of front-loading fade and new tariffs take effect. She forecasts a full-year growth rate of just 0.9%, a significant slowdown from 4.4% in 2024. Correspondingly, the Singapore government has revised its 2025 growth forecast downward to a range between zero and 2%, reflecting the broader uncertainties clouding the economic outlook.