MTI cites stronger-than-expected first-half performance but warns of slowing momentum in H2

Singapore’s Ministry of Trade and Industry (MTI) has raised its 2025 GDP growth forecast to 1.5–2.5 per cent after a robust first half, but cautions that the remainder of the year faces significant global economic uncertainties.

Forecast Raised After Strong Start

On 12 August, MTI upgraded its growth forecast from the earlier 0–2 per cent range, reflecting stronger-than-expected H1 performance. GDP expanded 4.4 per cent year-on-year in Q2 — a slight improvement over the 4.3 per cent advance estimate — following Q1’s 4.1 per cent growth. First-half GDP growth stood at 4.3 per cent. On a quarter-on-quarter basis, the economy grew 1.4 per cent in Q2, avoiding a technical recession.

Trade Tensions Ease — For Now

The revision comes after global economic conditions proved more resilient than anticipated. A 90-day pause in U.S. reciprocal tariffs, along with trade deals between the U.S. and key partners including the EU, Japan, South Korea, and Southeast Asia, eased immediate risks. US-China tariff talks also saw a temporary extension of their truce. This, coupled with frontloaded production and exports, boosted early-year performance.

Slower Growth Expected in H2

MTI warns that growth will moderate in the second half as frontloading effects fade and tariffs begin to bite. The U.S. economy is expected to slow amid weaker labour markets and dampened consumption, while the Eurozone and China face softer export demand. Southeast Asia will also feel the impact of reciprocal tariffs and easing domestic demand.

Key Risks on the Horizon

The ministry highlighted three main downside risks:

• A re-escalation of tariffs, reigniting uncertainty and curbing spending and hiring.
• Sharper-than-expected tightening in global financial conditions, causing destabilising capital flows.
• Geopolitical tensions disrupting energy supplies, pushing up global prices.

These could hit Singapore’s outward-oriented sectors, particularly manufacturing, wholesale trade, and transport. Consumer-facing sectors like retail and F&B may remain lacklustre as domestic spending softens.

Sectoral Performance in Q2

Year-on-year growth in Q2 was driven by wholesale trade (+4.7%), manufacturing (+5.2%), finance and insurance, and transportation and storage. Construction rose 6 per cent, reversing Q1’s decline. The F&B sector contracted for a second straight quarter (-0.5%), weighed down by reduced restaurant and fast-food sales due to more locals travelling abroad.

Trade Outlook and NODX

Enterprise Singapore reported non-oil domestic exports (NODX) rising 7.1 per cent in Q2, led by electronics (+10.5%) and non-electronic products (+6%). The NODX forecast for 2025 remains at 1–3 per cent, with expectations for weaker H2 growth as tariffs take effect.

While Singapore’s upgraded growth forecast signals resilience, MTI’s caution reflects the fragile balance between early-year gains and looming external headwinds. The second half of 2025 will test the economy’s ability to navigate tariff impacts, global demand shifts, and persistent geopolitical risks.

Sources: The Business Times (2025) , CNA (2025)

Keywords: Singapore GDP, MTI Forecast, Economic Growth, Trade Tariffs, Manufacturing, NODX