IMF cuts its Singapore 2025 growth forecast as Trump tariffs, US-China trade war bite

SINGAPORE – The International Monetary Fund (IMF) slashed its 2025 growth forecast for Singapore, along with those of its Asean neighbours, saying the outlook has dimmed amid US President Donald Trump’s global tariffs and his escalating trade war with China.

The pace of Singapore’s economic growth will drop to 2 per cent in 2025, from 4.4 per cent achieved in 2024, said IMF in the latest update to its World Economic Outlook report on April 24.

IMF’s previous forecast made in October 2024 for Singapore’s growth this year was 2.5 per cent.

The downgrade comes days after Singapore’s Ministry of Trade and Industry cut its 2025 forecast to a range of zero per cent to 2 per cent, from 1 per cent to 3 per cent previously.

IMF lowered its growth forecast for the Asean region to 4.1 per cent for 2025, down from 4.8 per cent achieved in 2024 and 0.6 percentage point lower than the IMF forecast in October 2024.

Mr Krishna Srinivasan, director of IMF’s Asia and Pacific Department, said the lower forecast for Asean is in line with with its 0.5 percentage point downgrade of the Asia and Pacific region which is now likely to grow at 3.9 per cent.

Addressing a press briefing in Washington on April 24, he said the lower forecasts for Asia – a region that accounted for nearly 60 percent of global growth in 2024 – reflects “weaker global demand, reduced trade, tighter financial conditions, and heightened uncertainty”.

Mr Srinivasan warned: “Risks are tilted to the downside in the face of the region’s greater vulnerability to the uncertain trade environment and weaker-than-expected global demand as well as asset price volatility increasing the potential for disrupting capital flows and investment.”

While IMF has also cut its estimates for global growth – to 2.8 per cent from 3 per cent – it believes Asia is more vulnerable to Mr Trump’s trade war as exports to the US and other advanced economies have been robust on demand for high-technology products, including a surge driven by artificial intelligence.

“That has significantly boosted the value of sales to the United States… leaving many Asian economies more vulnerable to fluctuating US demand and rising protectionism,” Mr Srinivasan said.

IMF slashed its 2025 US growth forecast to 1.8 per cent from 2.7 per cent. China is tipped to grow 4 per cent in 2025, down from 4.6 per cent. Japan is expected to expand by just 0.6 per cent in 2025, down from 1.1 per cent.

Slower growth in China will have a negative spillover for Asean economies that have deep trade and investment linkages with the world’s second-largest economy, IMF noted.

Beyond the vulnerability of Asia’s export-based growth model, many economies in the region also face structural headwinds such as population ageing and declining productivity.

However, Mr Srinivasan said Asean in particular can soften the blow from the trade war by furthering diversification of export markets and regional integration.

He said inter-regional trade in Asean, estimated at about 20 per cent of all trade within the region, is still less than the 60 per cent for Asia-Pacific.

“We see significant scope for more intra-regional trade in Asean, based on greater integration in the trade and financial spheres,” he said.

In a similar vein, initiatives like the Regional Comprehensive Economic Partnership can help deepen cooperation – not only in the trade of goods, but also in services, the digital economy, and regulatory harmonisation.

Digitalisation, which is already advanced in many parts of Asia, can help increase productivity and generate new jobs, particularly in services.

“Singapore is among the most digitally competitive economies, and South Korea and India lead in digital government services,” said Mr Srinivasan.

Asia’s export-led growth model delivered unprecedented prosperity, but the world has changed, he said.

“The challenges are real. So are the opportunities. Embracing smart policy choices will help Asia write the next chapter of its growth story – not just as the world’s factory, but as a dynamic, resilient, and integrated economic power,” said Mr Srinivasan.

Join ST’s Telegram channel and get the latest breaking news delivered to you.