Economic momentum slows in Q1

Economy enters 2025 on softer footing: A second release confirmed that GDP growth slowed to 4.4% year on year in the first quarter of 2025 from 4.9% in the fourth quarter of last year, marking the slowest expansion in a year. That said, on a seasonally adjusted quarter-on-quarter basis, GDP bounced back, increasing 0.7% in Q1, contrasting the previous quarter's 0.2% fall.

Both domestic demand and exports lose steam: The moderation in annual GDP growth was driven by weakening growth in private consumption, fixed investment and exports. Domestically, private consumption increased 5.0% in the first quarter, which was below the fourth quarter's 5.3% expansion. Moreover, fixed investment growth fell to 9.7% in Q1, marking the worst reading since Q1 2024 (Q4 2024: +11.8% yoy). That said, government spending accelerated to a 4.3% expansion in Q1 (Q4 2024: +4.0% yoy), chiefly supported by public infrastructure projects. On the external front, exports of goods and services growth fell to 4.1% in Q1, marking the worst result since Q4 2023 (Q4 2024: +8.7% yoy). Meanwhile, imports of goods and services growth softened to 3.1% in Q1 (Q4 2024: +5.9% yoy).

Economy to be more sluggish this year: In the remainder of the year, GDP growth should average below Q1’s level as inflation rises and elevated interest rates eat into domestic demand. Additionally, surging protectionism in global trade should keep a lid on exports growth. As a result, the economy will expand by less than in 2024 in 2025 as a whole. Earlier-than-expected interest rate cuts and greater-than-projected fiscal stimulus are upside risks.

Panelist insight: Nomura’s Euben Paracuelles and Yiru Chen said: “We maintain our 2025 GDP growth forecast of 4.4%, which we recently lowered from 5.2% to take into account the impact of increasing global trade tensions, which may have materialized earlier than we initially expected. Looking ahead, we continue to expect investment spending in both the private and public sectors to be key drivers of growth, owing to the government’s implementation of structural reforms and consistent progress on infrastructure projects. Further out, the establishment of the Johor-Singapore Special Economic Zone (JS-SEZ) will likely provide a significant boost despite the external environment.”

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