Economists are forecasting that Singapore’s economy will grow by 2.6% in 2025, a decrease from the expected 3.6% growth in 2024. This outlook, driven by concerns over geopolitical tensions and rising tariffs, was revealed in a quarterly survey conducted by the Monetary Authority of Singapore (MAS) on December 11.

The forecasts for GDP growth in both 2025 and 2024 have been revised upward from predictions made in the September survey. Economists had initially projected a 2.5% expansion for 2025 and a 2.6% growth for 2024.

In November, the Ministry of Trade and Industry (MTI) revised its 2024 growth forecast to approximately 3.5%, up from the previous estimate of 2% to 3%. However, MTI also projected that economic growth would decelerate to between 1% and 3% in 2025.

This 2025 estimate reflects expected cyclical moderation in GDP growth in the United States, which has been outpacing other developed markets. Additionally, the ministry noted that China’s economy is likely to slow due to weaker export performance.

MTI also highlighted increased uncertainty regarding U.S. economic policies following Donald Trump’s election in November.

A recent survey revealed that 100% of respondents cited geopolitical tensions as the primary downside risk to Singapore’s economy, a significant increase from 66.7% in the September survey.

US President-elect Donald Trump has pledged to raise tariffs on imports from around the world to as high as 20%. He is set to take office on January 20, 2025.

Han Teng Chua, an economist at DBS Bank, commented, “It’s unsurprising that geopolitical tensions have emerged as the most significant downside risk to Singapore’s trade-dependent economy following Trump’s election.”

He noted that trade policy uncertainty was already rising before the US elections in November and is expected to remain high with Trump 2.0 promising a wider trade war.

Mr. Chua stated, “We assess significant downside risks to Singapore’s economic growth from the potential impact of higher tariffs and ongoing policy uncertainty, particularly if global economic growth and trade slow noticeably, as they did in 2019 under Trump’s first term.”

The survey also indicates that inflation in Singapore is expected to ease further in 2025. Overall inflation is projected to decline to 1.9% from 2.5% in 2024, while core inflation, which excludes private transport and accommodation costs, is forecast to fall to 1.8% from 2.8% this year.

Although most economists anticipate that the MAS will maintain its current stance in upcoming monetary policy reviews, some analysts expect the central bank to hint at a potential easing.

While most central banks rely on interest rates to guide their monetary policy and control inflation, the MAS utilizes the exchange rate for this purpose. This approach is largely due to the fact that much of Singapore’s inflation is driven by the prices of imported goods and services.

In terms of the labor market, Singapore’s overall unemployment rate is projected to be 2% by the end of 2024, a slight improvement from the earlier forecast of 2.1%.

Key words: #SingaporeEconomy #EconomicGrowth #MAS #GeopoliticalTensions #Tariffs #Inflation #Unemployment #TradeWar #MonetaryPolicy