Singapore’s Growth Surprises in Q1, But Recession Risks Still Loom

Singapore’s economy got off to a stronger-than-expected start in 2025, but the government is sounding cautious notes amid mounting global trade tensions. Despite the upbeat growth numbers, officials are not ruling out the possibility of a technical recession later this year, raising concerns about the city-state’s vulnerability to external shocks, as per Bloomberg news report.

Stronger Q1, but Growth Outlook Stays Subdued

In the first quarter of 2025, Singapore’s GDP expanded by 3.9% year-on-year, outpacing both the government’s earlier estimate of 3.8% and market expectations of 3.6%. This growth was largely fuelled by robust manufacturing and export activity as firms moved quickly to beat higher U.S. tariffs.

However, on a quarter-on-quarter, seasonally adjusted basis, GDP contracted by 0.6%, reinforcing fears of a possible technical recession defined as two consecutive quarters of negative quarterly growth.

The Ministry of Trade and Industry (MTI) kept its full-year growth forecast unchanged at 0%–2%, citing persistent risks from global tariff disputes and subdued external demand.

Technical Recession vs. Real Recession

Officials stressed that a technical recession doesn’t necessarily mean the broader economy is in full retreat. Beh Swan Gin, MTI’s permanent secretary, noted that while a technical recession is possible, year-on-year growth figures remain in positive territory, providing some buffer against more dire scenarios.

Singapore last experienced a technical recession in 2020 during the height of the COVID-19 pandemic. Prior to that, similar patterns were seen during the global financial crisis in 2008.

Global Tensions Fuel Uncertainty

Much of the anxiety stems from continued friction between the world’s two largest economies. The ongoing US-China trade disputes, despite a recent 90-day tariff truce, have injected volatility into global trade flows. As a highly trade-dependent economy exports and imports are roughly three times the size of its GDP Singapore remains highly sensitive to such disruptions.

Any re-escalation in tariffs or breakdown in global disinflation trends could destabilise capital flows and weigh on investment confidence, officials warned.

Sectoral Slowdowns Expected

The outlook for Singapore’s key outward-facing sectors like manufacturing, wholesale trade, and transport services remains cloudy. Even the typically resilient finance and insurance segments are expected to take a hit due to subdued trading activity. Consumer-driven sectors, meanwhile, are likely to see only modest gains.

That said, Singapore’s policymakers are prepared to act. “Fiscal buffers and proactive policymaking offer room to cushion any external shocks,” noted Charu Chanana of Saxo Markets.

MAS Stays the Course

The Monetary Authority of Singapore (MAS) is set to reassess its policy stance in the lead-up to its July meeting. While MAS has already eased monetary policy twice this year, 

Deputy Managing Director Edward Robinson said current settings remain appropriate, indicating no immediate changes unless conditions deteriorate further.

Read More: Trump Tells Apple Not to Expand Production in India Amid Trade Tensions: Report.

Conclusion

Singapore’s better-than-expected Q1 performance offers a glimmer of optimism, but the path forward is clouded by external uncertainties, particularly ongoing global trade tensions. While a technical recession remains a risk, strong fundamentals, fiscal preparedness, and strategic policymaking give the city-state room to maneuver.

For investors, businesses, and policymakers alike, staying agile and closely monitoring geopolitical and economic shifts will be essential in navigating the rest of 2025.

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