Economic Expansion Slows in 2025 Amid Global Challenges, Yet Jobs and Wages Expected to Remain Stable

Singapore’s economy showed resilience in 2024, with a growth rate of 4.4%, surpassing earlier forecasts of 4%. This positive outcome is attributed to strong performances in various sectors, including manufacturing and trade-related services. However, the Ministry of Trade and Industry (MTI) has warned that growth is set to decelerate in 2025, with projections of just 1% to 3% expansion. The global economic landscape remains uncertain, marked by escalating geopolitical risks and fluctuating US trade policies, which could undermine future growth.

Strong Performance in 2024
For the fourth quarter of 2024, Singapore’s economy grew by 5%, exceeding initial estimates of 4.3%. MTI’s economic survey released on February 14 highlights the robust performance of the manufacturing sector, which grew by 7.4% year on year in Q4, building on an impressive 11.2% growth in Q3. Despite this, the sector experienced a slower pace of growth in the latter half of the year, with quarter-on-quarter growth stagnating at 0%.

This performance was driven by strong demand for electronics, particularly semiconductor chips, alongside healthy output from the aerospace and marine sectors. The finance and insurance sectors also saw solid gains, with the finance sector growing by 6.8% for the year, up from 3.1% in 2023.

2025: A Challenging Year Ahead
While 2024’s results were promising, MTI maintains a cautious outlook for 2025, citing the potential risks from global economic uncertainties, particularly the US’s evolving trade policies under President Donald Trump. These challenges, which include rising geopolitical tensions and escalating trade barriers, may dampen global investment and trade, negatively impacting Singapore’s economy.

Analysts are particularly concerned about the effect of US tariffs on global trade. Although Singapore’s exports to the US are largely unaffected by tariffs due to the free trade agreement between the two nations, the broader global economic slowdown may result in weaker demand for Singaporean products.

Employment and Wage Growth Remain Stable
Despite the anticipated slowdown, MTI assures that the economy’s softer growth trajectory is not expected to significantly impact job creation or wage increases in the short term. Permanent Secretary Beh Swan Gin noted that Singapore’s unemployment rate remained stable at 2% in 2024, a slight increase from 1.9% in 2023, while median real income rose by 3.4%.

Beh highlighted that the employment situation remains steady, with stable vacancy rates and low retrenchment figures. However, the MTI will continue to monitor the situation as global economic conditions evolve.

Risks of Prolonged Inflation
MTI also warned of the possibility of prolonged inflation, which could lead to tighter financial conditions and potentially expose vulnerabilities in the banking and financial systems. While inflation rates remain a concern, Beh acknowledged that forecasting for 2025 remains challenging due to the unpredictable nature of US policy shifts, including potential tax reforms that may benefit both the US and Singapore’s economies.

Key Sectors to Watch in 2025
Looking ahead, MTI expects Singapore’s manufacturing sector, particularly the electronics and transport engineering clusters, to continue expanding in 2025, albeit at a slower rate. Growth in the services sectors such as information and communications, and finance and insurance, is also anticipated, though retail trade and food services may experience slower growth, partly due to domestic spending shifts abroad.

Enterprise Singapore’s report forecasts a modest 1% to 3% growth in non-oil domestic exports (Nodx) for 2025, aligning with the World Trade Organization’s projections for faster merchandise trade growth globally compared to 2024.

In conclusion, while Singapore’s economy exceeded expectations in 2024, the challenges ahead, particularly from global uncertainties and trade tensions, will require careful management to maintain stability and continue fostering growth.