Singapore raised its economic growth projection for the year, no longer seeing the risk of growth flatlining as tariff headwinds ease, though it warned that the outlook remains clouded by uncertainty, with risks to the economy tilted to the downside.
The Ministry of Trade and Industry increased its 2025 gross domestic product growth forecast for the city-state to 1.5%-2.5% from 0.0%-2.0%, after a better-than-expected performance in the first half of the year.
The economy expanded 4.4% in the second quarter from a year earlier, revised data showed, exceeding both the advance estimate of 4.3% growth and the 4.1% expansion in the first quarter. That brought first-half GDP growth to 4.3%.
Most advanced and regional economies have proved more resilient than feared in the months since President Trump first announced sweeping tariffs in April, the trade ministry said Tuesday.
As a small, open economy, Singapore is reliant on trade and a stable global environment. Officials had previously slashed growth forecasts to as low as zero this year, warning that trade chaos would hurt the city-state's export-dependent economy.
The ministry said Washington's subsequent pause on so-called reciprocal tariffs to allow for trade negotiations postponed the negative economic impact, while front-loading to get ahead of levies temporarily boosted production and exports.
Trade tensions have also cooled, with the U.S. striking deals with Japan and several Southeast Asian nations, said Beh Swan Gin, permanent secretary at the trade ministry.
The U.S. and China are also continuing trade negotiations, extending the 90-day tariff truce between the two largest economies by a further three months.
Manufacturing, which contributes a big chunk to Singapore's GDP, rose 5.2% from a year earlier in the April-June period, accelerating from the 4.7% increase in the previous quarter.
On a quarter-over-quarter seasonally adjusted basis, Singapore's GDP grew by a revised 1.4%. That matched the advance estimate and rebounded from the 0.5% contraction in the first quarter, soothing fears of a technical recession.
However, officials cautioned that the momentum will cool in the remainder of the year as front-loading effects fade and the impact of tariffs starts to take root.
The U.S. has set a 10% tariff on Singapore, but the city-state is still at risk of being hit with additional duties on pharmaceuticals, one of its key exports.
"In particular, the pace of growth in Singapore's manufacturing sector is projected to weaken in the coming quarters as the U.S. tariffs weigh on demand on global end-markets," Beh said.
Meanwhile, growth in the finance and insurance sector will likely be damped by fragile business confidence and tepid consumer spending, he said.
Enterprise Singapore maintained its 2025 non-oil domestic export growth forecast of 1.0% to 3.0%, citing continued uncertainty from tariffs and the threat posed by sector-specific U.S. levies. That was despite NODX holding up better than expected in the first half of the year and more than doubling its pace of growth in the second quarter from the first.
"We will continue to monitor developments in the global and domestic economies closely," Beh said.