Singapore dodges recession as Q2 GDP beats forecasts

According to advance estimates from the Ministry of Trade and Industry (MTI) released Monday, the city-state’s economy expanded by 1.4% on a seasonally adjusted annualized basis—bouncing back from a 0.5% contraction in the previous quarter and beating economists’ forecast of 0.8% growth.

GDP was 4.3% higher than a year earlier, topping the 3.6% estimate in a Bloomberg survey of economists. This was largely thanks to the resilience of the factories and services sectors, with manufacturers rushing to fill export orders before implementing new US trade tariffs on August 1.

Selena Ling, head of research and strategy at OCBC Bank, said the quarterly rebound was likely driven by “front-loading effects,” as companies rushed to complete orders before the higher tariffs took effect. She cautioned, however, that there were still questions about how much momentum the economy might lose once the tariffs are implemented.

Singapore’s central bank, the Monetary Authority of Singapore (MAS), had already warned of the risk of a technical recession, or two straight quarters of contraction in economic activity. Monday’s numbers have helped address those concerns, at least for now.

Construction and services sectors power Singapore’s Q2 rebound 

The bounce in the construction sector was another critical driver of the Q2 recovery. The category was 4.4% higher in the quarter, a dramatic turnaround from its 1.8% Q1 pace. Much of this expansion was driven by expansion in public sector infrastructure work, which was boosted to support the economy as world trade became increasingly uncertain.

The MTI also noted continued strong performance in services-producing industries, which expanded 4.8% year-on-year. This increase partially resulted from “front-loading activities” in some service-related sectors, such as wholesale trade, finance, and logistics, that experienced stronger demand before the tariff deadline.

Singapore’s economy is extraordinarily reliant on trade; its combined trade is approximately three times the size of its GDP, thus it is very exposed to global trade storylines. However, the short-term gains from rushing exports ahead of deadlines may not be sustained over the months ahead.

“We see momentum softening in the year’s second half,” said Khoon Goh, Head of Asia Research at Australia & New Zealand Banking Group (ANZ). But he said that given the big lift from the strong GDP figures, most analysts are likely to believe there won’t be any move in monetary policy this month.

Economists warn of slower growth in H2

After better-than-expected second-quarter numbers, focus has shifted to the second half 2025. The world economy is still caught between increasing protectionism, weakening demand, and persistent uncertainty about US trade policies. Analysts say the risks are high, while cloudy US trade moves will probably undermine Singapore’s economic momentum in the coming months.

Nevertheless, Singapore was more immune to the worst punitive duties – the US imposed a 10% import duty, not the 25% meted out to its ASEAN neighbours. However, any lasting decline in global trade flows would have knock-on effects across the island’s open economy.

The MAS, which manages policy through the currency against exchange rates rather than interest rates, will probably be cautious. Analysts say the central bank will likely refrain from big policy changes unless global conditions materially deteriorate.

According to Bloomberg Economics ‘ ASEAN economist Tamara Mast Henderson, Singapore’s economy will have a “harder road ahead” as the effect of front-loading wanes and fresh US tariffs bite. She forecasts the economy will expand just 0.9% for the full year, a steep deceleration from 4.4% in 2024.

Consistent with these rosy forecasts, the government has lowered its 2025 growth forecast to between zero and 2%.

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