WORRIES OVER GROWTH AND UNEMPLOYMENT
Unlike the past few years, the risk in 2025 is slowing growth rather than stubborn inflation.
Singapore faces a lower risk of direct tariffs from President Trump, given that the US consistently exports more than it imports from Singapore – with the singular exception being the pandemic year of 2020.
Furthermore, Singapore is the only Southeast Asian economy with a bilateral free trade agreement with the US – a deal that has been in place since 2004. This should offer some protection from tariff risks.
However, the country will still be impacted by the tariffs’ negative shocks to the global trade environment, given its extensive reliance on trade as a small and open economy.
We calculate that a 1 per cent fall in Singapore’s total trade could lead to a 0.25 per cent decline in real GDP growth.
Taking history as a guide, the previous US-China trade war led to slower trade growth in 2018 for Singapore, and merchandise trade eventually contracted 3.2 per cent in 2019.
The entire economy managed to eke out 0.7 per cent in real growth in 2019, down from 3.4 per cent in 2018.
The government forecasts growth to slow to 1 to 3 per cent this year, down from 4.4 per cent in 2024.
Slowing growth could have a knock-on effect on employment. Advance labour market estimates show that Singapore’s overall unemployment rate was still low at 2 per cent in 2024, similar to 1.9 per cent in 2023.
However, if growth declines, unemployment and retrenchments could inch up. Certain segments would be more heavily impacted, such as young workers without relevant job experiences.
For instance, the 2024 Joint Autonomous Universities Graduate Employment Survey shows that 87.1 per cent of fresh graduates were employed within six months, down from 89.6 per cent in 2023. About 79.5 per cent found a full-time job, from 84.1 per cent the year before.
