In a nutshell, the Singapore economy has fared better-than-expected in the first half of 2025, according to recent reports by the Ministry of Trade and Industry (MTI).
The ministry recently upgraded Singapore’s gross domestic product (GDP) growth forecast for the year to 1.5-2.5 %, up from 0-2% previously.
This is the second time this year that the ministry is changing its growth forecast for 2025. The forecast was initially set for growth of 1-3% but was later downgraded in April 2025 after US President Donald Trump announced a global baseline tariff of 10% and reciprocal tariffs on many other economies.
Since then, the performance of most advanced and regional economies has been more resilient than expected as the US’ 90-day pause on its reciprocal tariffs postponed the potential negative economic impact, while front-loading activities during the tariff pause provided a temporary boost to production and exports.
There has also been a de-escalation in trade tensions, with the US striking trade deals with several trading partners, including the Eurozone, Japan, South Korea and several Southeast Asian economies, that led to a lowering of their reciprocal tariffs.
Meanwhile, the US and China continue to be engaged in trade talks, with indications that the 90-day tariff truce between the two countries could be extended.
Consequently, the 2025 GDP growth of the key economies, including the US, Eurozone and China, is not expected to be as weak as earlier projected.
As such, MTI has updated its assessment of the overall external outlook for Singapore.
Outlook and risks for Singapore’s economy for the rest of 2025
Overall, the balance of risks in the global economy is skewed to the downside.
First, a re-escalation of tariff actions could lead to a renewed spike in economic uncertainty, and cause businesses and households to pull back sharply on spending and hiring.
Second, a shock to financial markets, resulting from a sharper-than-expected tightening of global financial conditions, could lead to destabilising capital flows that trigger latent vulnerabilities in banking and financial systems. Third, potential escalations in geopolitical tensions could lead to supply disruptions in energy commodities, as well as renew pressures on global energy prices.
Against this backdrop, Singapore’s economic growth is expected to slow in the second half of the year, as compared to the first half, because of slower growth in outward-oriented sectors.
In particular, the pace of growth in the manufacturing sector is projected to weaken in the coming quarters, as the US’ tariff measures impact demand in global end-markets.
Nevertheless, there remains some bright spots within the sector. This includes the transport engineering cluster, with the sustained shift towards higher value-added aircraft maintenance, repair and overhaul works in Singapore. The precision engineering cluster also sees a positive light, due to the continued ramp-up in capital investments by manufacturers producing AI-related semiconductors.
Growth in the wholesale trade sector is similarly expected to slow for the rest of 2025, as the lift from front-loading activities in the region wanes and global trade softens.
These factors will also affect the transportation and storage sector through their drag on the demand for shipping and air cargo services.
In the finance & insurance sector, growth is likely to dampen because of weaker credit demand and lower payment transaction volumes, due to fragile business confidence and tepid consumer spending.
Nonetheless, bullish market sentiment could keep trading activity buoyant and provide some upsides to growth.
Finally, growth in consumer-facing sectors, such as retail trade, and food and beverage services, is likely to remain lacklustre for the rest of the year. This is weighed down by the continued shift in locals’ spending abroad and the projected weakening of domestic labour market conditions.
Wondering how your sector has fared so far in the second quarter of 2025? Read on below!
How Singapore’s key sectors are faring in 2025
Manufacturing
Expanded by 5.2% year-on-year, extending the 4.7% growth in the preceding quarter. All clusters, except chemicals and general manufacturing, recorded increased output
Construction
Grew by 6% year-on-year, extending the 4.9% expansion in the previous quarter
Wholesale trade
Expanded by 4.7% year-on-year, picking up from the 4.0% expansion recorded in the preceding quarter
Retail trade
Expanded by 0.7% year-on-year, extending the 0.3% growth recorded in the previous quarter
Transportation and storage
Posted growth of 5.1% year-on-year, moderating from the 6.2% growth in the previous quarter
Accommodation
Expanded by 2.4% year-on-year, reversing the 1.1% contraction in the previous quarter
Food and beverage
Contracted by 0.5% year on year, extending the 0.7% decline in the previous quarter
Finance and insurance
Expanded by 4.2% year-on-year, extending the 4.1% gain in the preceding quarter.
Real estate
Expanded by 5.2% year-on-year, following the 7.5% in the preceding quarter
Professional services
Grew by 3.3% year-on-year, extending the 1.9% expansion in the previous quarter.
Singapore’s water and air transport segments
MTI’s report also examined recent trends in the performance of the water transport and air transport segments in Singapore, as well as their near-term outlook.
Here are some key findings:
- Growth of the water transport segment picked up in 2024 with the recovery in global merchandise trade volume. More recently, in the first half of 2025, growth further strengthened on the back of container repositioning and front-loading activities.
- Turning to the air transport segment, performance slumped in 2020 before recovering in 2021 and 2022, primarily because of the pickup in air passenger traffic. More recently, growth was supported by front-loading activities in air cargo in the first half of 2025.
- Looking ahead, growth in Singapore’s water and air transport segments is expected to weaken in the second half. This comes with the anticipated slowdown in global trade, as the boost from front-loading activities dissipates and the US’ reciprocal tariffs take effect.
- However, over the longer term, Singapore continues to invest in its seaport and airport infrastructure. Adding on its building up of sea and air connectivity, growth prospects of these segments remain bright.
