CGS cuts 2025 GDP forecast to 1.6% amidst tariff risks

The firm emphasised that Singapore’s ability to offer new concessions is limited, given its already liberalised trade framework.

CGS International has downgraded Singapore’s 2025 GDP growth forecast to 1.6%, from an earlier projection of 2.5%, citing mounting trade-related pressures from newly imposed US reciprocal tariffs.

In its latest ASEAN macroeconomic update, CGS International noted that despite Singapore’s existing Free Trade Agreement with the US, the country has been included in the baseline 10% tariff.

The firm emphasised that Singapore’s ability to offer new concessions is limited, given its already liberalised trade framework.

“Unless the US reduces its baseline tariff rate, there is limited room for further tariff relief specific to Singapore,” CGS International stated.

CGS International observed that Singapore, whilst assigned the lowest reciprocal tariff rate amongst ASEAN economies, faces structural challenges in responding to the new trade environment. As a highly open economy, its growth trajectory remains closely tied to global trade flows.

“Singapore is likely to exhibit some negative repercussions from the imposition of the 10% tariff,” the report noted.

Around 60% of Singapore’s exports to the US are currently excluded from the tariffs, largely due to exemptions in sectors such as semiconductors. However, CGS International cautioned that these exclusions may be temporary as further US policy reviews are underway.

In response to the external headwinds, CGS International expects the Monetary Authority of Singapore (MAS) to ease policy further in 2025. The MAS has already reduced the rate of appreciation of the S$NEER, Singapore’s nominal effective exchange rate, to support growth.

“There is a strong likelihood that MAS will adjust the S$NEER at least once more this year,” CGS International projected.

The firm also revised its year-end US$/SGD forecast to 1.35, up from 1.32, citing slower expected appreciation of the Singapore dollar amidst policy adjustments and global trade volatility.

CGS International’s report suggested that Singapore’s current growth model, heavily reliant on trade and global supply chains, may face limitations in the new trade environment. The firm noted the potential for longer-term shifts in ASEAN's development strategies.

“The US’ plan to dismantle the current global trading system… is likely to lead to limited gains for the bloc going forward,” the report stated.

CGS International concluded that Singapore, like its regional peers, may need to explore alternative growth drivers, including domestic consumption and intra-regional trade diversification.