RHB warns retail momentum may fade in second half of 2025

Retail sales in March rose 1.1% YoY, rebounding from a sharp 3.5% decline in February.

Singapore’s retail sector is expected to stay resilient through the first half of 2025, but momentum is likely to wane in the latter half as economic conditions deteriorate, according to a new report by RHB Bank.

“We expect Singapore’s retail climate to stay supported at least into 1H25,” the report stated. However, it cautioned that “retail sales growth [is] expected to slow down in 2H25 due to the economic headwinds expected for the year ahead.”

Retail sales in March rose 1.1% YoY, rebounding from a sharp 3.5% decline in February. Online sales showed particular strength, climbing 11.9% YoY and making up 13.4% of total sales — the highest share since November 2024.

RHB pointed to three key factors that may buoy retail sales in the near term: government support measures, tourism-driven events, and robust online commerce.

“Consumer spending may be supported by government support measures through Budget FY2025,” the economists wrote.

Notably, the CDC voucher scheme will distribute $800 to each household, with $500 arriving in May 2025 and the remainder in 2026. These payouts “are expected to bolster consumer purchasing power, likely leading to higher spending, especially in food retail and other domestic sectors.”

Tourism is also expected to play a significant role. The report highlighted “a series of international events,” including Lady Gaga’s concert in May, which is “anticipated to boost tourism significantly,” benefiting sectors like hospitality, transportation, and retail.

Still, the positive outlook is tempered by warning signs. “The city-state's retail climate will likely be impacted by softness in the labour market and the gradual economic slowdown this year,” the report noted. Employment growth is expected to weaken, particularly in trade-related industries like manufacturing and wholesale.

Externally, rising trade tensions pose another risk. “Rising trade tensions could increase economic uncertainty, dampening global business investment and consumer spending,” it added. Sluggish growth forecasts for major economies, including the US and China, are expected to weigh on Singapore’s export-driven economy.

Given these pressures, RHB revised Singapore’s full-year GDP growth forecast to 2.0%, but warned of “downside risks lean towards a 0.5% - 1.0% growth range in 2025.”

Although sales picked up in categories like supermarkets (up 3.4%), furniture (2.5%), and recreational goods (3.2%), declines continued in others, including apparel (-8.0%) and petrol services (-8.2%). Sales of motor vehicles also lost steam, growing just 3.3% YoY compared to 20.0% the month before.

With domestic and global headwinds gathering, the report concluded that “retail demand may likely slow in tandem with easing GDP growth momentum,” urging caution for the months ahead.