Singapore’s economy, which saw a robust 5.0% year-on-year growth in the fourth quarter of 2024, may face significant challenges in 2025 due to escalating trade tensions, according to a report by UOB Global Economics and Markets Research. The report highlights the potential impact of new US tariffs and China’s retaliatory measures on Singapore’s growth prospects.
The fourth quarter of 2024 witnessed stronger-than-expected GDP growth, driven by a 7.4% increase in manufacturing and a 4.6% rise in services. However, the construction sector lagged behind with a 4.4% growth. The finance and insurance sectors showed remarkable resilience, with a 5.3% quarter-on-quarter increase, attributed to heightened trading activity and increased credit intermediation.
Despite these gains, UOB warns that the looming trade war could dampen growth. The report notes that the US’s “Fair and Reciprocal” plan, which targets economies with significant trade surpluses, could indirectly affect Singapore’s trade-reliant economy. “Whilst Singapore may be less susceptible to direct US tariff risks, we will not be shielded from a negative shock to the global trade environment,” the report states.
Looking ahead, large-scale projects like Changi Airport Terminal 5 are expected to bolster construction demand in 2025. Additionally, consumer-facing sectors might see a recovery, supported by an anticipated expansionary Budget 2025 and increased tourism efforts.
UOB maintains its 2025 GDP growth forecast at 2.5%, cautioning that risks remain skewed to the downside. The report suggests that growth momentum could slow in the second half of 2025, potentially leading to a negative output gap for the year.
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