 "Passersby hold their mobile phones to take selfies with Singapore's central business district skyline in the background, Singapore, May 10, 2019. (Photo: Reuters)")
US President Donald Trump’s tariffs appear set to drive Singapore into a technical recession this year.
While Trump has imposed just 10 per cent tariffs on Singapore, the bleak outlook for global trade and growth has pushed growth projections for Singapore down.
Singapore is currently staring at possible contractions in the first two quarters of the year that some economists say could enter into the third quarter as well.
Technically, an economy is in recession once it has had contraction in growth for two consecutive quarters. This means that Singapore is staring at a technical recession this year as a result of Trump’s tariffs.
Trump’s tariffs slash Singapore’s growth projections
Singapore’s government has downgraded the growth forecast from 1-3 per cent to 0-2 per cent for the first quarter.
“Although there has been a temporary 90-day pause in the implementation of the higher reciprocal tariffs, except for China, the tariff war between the US and China has intensified, with an escalating cycle of tit-for-tat tariffs being imposed by both sides,” said Singapore’s Ministry of Trade and Industry (MTI) on Monday.
As per the advanced estimates released on Monday, Singapore’s economy contracted 0.8 per cent in the first quarter, according to Business Times.
The twin developments have led to economists downgrading the growth projection for the entire year.
OCBC has reduced the full-year growth forecast to “closer to 1.6 per cent year on year” from 2.1 per cent previously.
Citi economist Kit Wei Zheng has downgraded Singapore’s full-year forecast from 2 per cent to 1.4 per cent for 2025 and 1.2 per cent for 2026. He sees a mild three-quarter technical recession with 0.3 per cent quarter-on-quarter contraction on average between the third quarter of this year and the first quarter of 2026.
Impact Shorts
More ShortsBarclays analysts Brian Tan, Liu Hongying, and Audrey Ong have downgraded their growth forecast to 0.2 per cent from 1.7 per cent previously. For the next year, the economy is projected to contract at 0.3 per cent. Previously, the economy was projected to grow at 0.5 per cent.
The downgrading comes as Singapore’s export-reliant sectors are expected to be hurt by tariffs.
Previously, Singapore’s Prime Minister Lawrence Wong had said that fewer jobs are expected to be added this year and salary hikes are also expected to be lower-than-expected. He further expressed concerns about unemployment and job losses if companies could not adapt to Trump’s tariff regime.