Singapore’s economy may be significantly impacted by new tariffs imposed by the US, according to a preliminary assessment by UOB Global Economics and Markets Research. The US has applied a 10% reciprocal tariff rate on Singapore, which, whilst lower than rates for other Asian economies, could still lead to a slowdown due to Singapore’s high exposure to US demand.
The report highlights that Singapore’s domestic value-added in foreign final demand exceeds 60% of its nominal GDP, making it particularly vulnerable to external shocks. Despite having a bilateral Free Trade Agreement with the US, Singapore’s exports are still subject to the new tariffs. UOB’s risk metric suggests that Singapore could be more susceptible to economic slowdowns in major trading partners such as China, the EU, and Japan.
The Monetary Authority of Singapore (MAS) has responded by stating it is prepared to kerb excessive volatility in the Singapore dollar and ensure orderly market functioning. The S$NEER index has already seen a decline following the tariff announcements.
UOB’s growth outlook indicates that Singapore’s Q1 2025 growth may ease from the previous quarter’s 5% year-on-year increase, with trade-related sectors expected to moderate. The full-year GDP growth forecast of 2.5% may be revised downwards, potentially nearing the lower end of the Ministry of Trade and Industry’s forecast range of 1.0-3.0%.
Inflation forecasts have also been adjusted, with UOB downgrading its core inflation prediction for 2025 to 1.0% from 1.3%, citing deflationary risks from weakened global demand. The MAS is expected to consider further monetary policy easing in its upcoming April 2025 statement, potentially reducing the slope of the S$NEER policy band.
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