Singapore dodges recession but faces H2 slowdown risk: analyst

Despite the strong Q2 numbers, Nomura expects growth to soften in the second half of the year.

Singapore’s economy staged a strong recovery in the second quarter of 2025, avoiding a technical recession with GDP growth rebounding to 1.5% QoQ seasonally adjusted, up from -0.6% in Q1, according to Nomura’s latest Asia Insights report.

On a year-on-year basis, GDP growth is tracking at 4.4%, beating both the previous quarter’s 3.9% and the consensus estimate of 3.5%.

The rebound is being driven largely by a surge in total exports, helped by front-loading and re-routing effects. These factors have lifted industrial output and trade-related services.

As a result, Nomura has held firm on its full-year 2025 GDP forecast of 2.0%, which is above the market consensus of 1.7% and at the top of the official forecast range of 0.0–2.0%.

Manufacturing activity improved, with industrial production up 4.7% YoY in April to May, led by strong electronics output and rising non-oil domestic exports. The construction sector also remained resilient, growing 9.7% YoY, up from 8.2% in Q1.

Services data were mixed. Hotel room revenue returned to positive growth at 1.8% YoY, and outpatient visits increased to 4.9%. However, sea cargo volumes declined further, and retail sales dropped 1.0% in April to May.

Despite the strong Q2 numbers, Nomura expects growth to soften in the second half of the year. The firm warns of potential payback effects from early export gains and cites external risks such as new US tariffs, particularly on key sectors like pharmaceuticals, that could impact Singapore directly.

To offset any headwinds, analysts anticipate the government will roll out significant fiscal support, especially targeting the labor market.

 Nomura’s upgraded tracking model, the Coincident Monthly Activity Indicator (NCMAI), now includes 16 components, up from 12, broadening its coverage of the economy from 80% to 83% of GDP.

The revisions add more detail from key sectors such as transport, finance, health, and accommodation, aiming to better reflect real-time activity.