Singapore: Economic growth accelerates in the second quarter
Stronger-than-expected GDP growth in Q2: According to an advanced estimate, year-on-year GDP growth accelerated to 4.3% in the second quarter of this year, from an upwardly revised 4.1% in the first. The reading, among the strongest in two years, defied expectations for a slowdown and surprised markets on the upside.
On a seasonally-adjusted quarter-on-quarter basis, economic activity rebounded, increasing 1.4% in Q2, contrasting the previous quarter’s 0.5% fall.
Manufacturing and services propel Q2 GDP growth as front-loading continues: Looking at the details of the release, year-on-year services activity—accounting for roughly three-quarters of GDP—gained steam, growing 4.1% in Q2 (Q1: +3.7% yoy). Faster growth across all services subcomponents, particularly in wholesale and retail trade plus in transportation and storage, hints at sustained momentum due to the front-loading of sales ahead of U.S. tariffs. Moreover, industrial activity grew 5.0% annually in the second quarter, picking up from the first quarter’s 4.3% increase. Manufacturing production rose at a stronger clip, likely bolstered by the same front-loading factor, plus the electronics sector upcycle. Moreover, although slightly losing momentum, the construction sector grew at a robust pace as the implementation of the Johor-Singapore Special Economic Zone (JS-SEZ) and large infrastructure projects—including Changi Airport’s Terminal 5, major hotel expansions and the government’s housing initiatives—continue to buttress momentum.
A complete breakdown will be published by 25 August.
GDP growth to cool in 2025: Our Consensus is for the economy to lose traction from current levels through the end of 2025, as the temporary boost provided by front-loading ahead of U.S. tariffs should gradually fade throughout the year. As a result, our panel expects GDP growth to ease in 2025 after hitting a three-year high in 2024 and reach one of the lowest levels in the past five years. Both private and public spending are seen losing steam as high base effects kick in and government cost-of-living support is scaled back. Moreover, rising global trade tensions are likely to weigh on exports. On a more positive note, fixed investment should support economic growth, helped by looser monetary conditions and progress on the JS-SEZ.
Panelist insight: Commenting on the outlook, Nomura’s Euben Paracuelles and Charnon Boonnuch stated:
“Taking into account the stronger-than-expected growth outturns in H1, we raise our 2025 GDP growth forecast […]. Our new forecast still implies a slowdown to 1.1% y-o-y in H2 from 4.2% in H1, reflecting payback effects after the front-loading of exports. This forecast takes into account the offset from sizeable fiscal support measures we think will be rolled out in Q3, especially for labour markets, providing some offset. […] Uncertainty around the growth outlook remains elevated due to U.S. tariff policy, which could have large indirect effects on Singapore’s economy. In addition, the threat of sectoral tariffs, such as on pharmaceuticals, could pose a more direct hit.”