Singapore growth to slow as trade tensions rise, but green, digital opportunities will emerge: DPM Gan

Intensifying trade frictions and competition for strategic investments among major economies will weigh on the pace of Singapore’s economic growth in 2025, Deputy Prime Minister and Minister for Trade and Industry Gan Kim Yong said. Hence, the economy will expand by 1 per cent to 3 per cent, slower than the 4.4 per cent pace in 2024.

Inflation, however, is likely to stay moderate, with core inflation – which excludes private transport and accommodation costs – at 1 per cent to 2 per cent in 2025, DPM Gan said on 6 March in the debate over the Trade and Industry Ministry’s 2025 budget.

Nevertheless, Asia’s economy will continue to grow, and Southeast Asia is expected to become the fourth-largest economy in the world by 2030, he added.

Artificial intelligence, digitalisation, and the low-carbon transition will also present new opportunities in the region’s digital and green economy.

Meanwhile, as the trade war between the US and its major trading partners intensifies, global trade flows will reconfigure.

“Singapore can capitalise on the shifts in production and supply chains to attract new investments and strengthen its position as a key node in the reconfigured trade flows,” DPM Gan said.

The minister said the Republic will enhance its focus on the economy’s long-term growth potential through a four-plank strategy of strengthening its connectivity to the region and the world; growing strong enterprises through innovation; fostering a pro-enterprise environment; and investing in its people.
 

Riding on new opportunities

Part of this strategy is to strengthen Singapore’s ecosystem of innovation-driven businesses at home by doubling down on its research and development (R&D) initiatives.

To remain a semiconductor powerhouse, Singapore must invest in R&D to drive innovation across the industry, DPM Gan said.

He highlighted details on initiatives to grow strong enterprises through innovation, including allocating S$500 million from Budget 2025 to build a new national semiconductor R&D fabrication facility in Tampines.

DPM Gan shared new additions to the toolkit to support enterprise growth such as the Long Term Investment Fund, which will deploy more than S$200 million of government capital over a longer time horizon to enterprises with longer and more complex growth trajectories. He also gave details of the new S$1 billion Private Credit Growth Fund targeted at local enterprises with strong growth potential to support them in becoming leaders in their industries.

The minister also announced three statements of commitment by the Inter-Ministerial Committee to enhance the Government’s regulatory efficiency and support business competitiveness.

Singapore will deepen economic integration with its ASEAN neighbours with initiatives such as the agreement on the Johor-Singapore Special Economic Zone (JS-SEZ) with Malaysia, signed earlier in 2025.

“This will benefit our firms here by allowing them to tap the resources available in Johor to expand and grow.

“JS-SEZ will also allow Singapore and Malaysia to draw in new investments, by offering a more compelling value proposition based on our complementary strengths combined together,” DPM Gan said.
 

He added that Singapore will continue to build on its existing cooperation with Indonesia, particularly in Batam, Bintan, and Karimun, as well as explore new areas of cooperation.

The Republic will enhance digital trade and improve market access for its companies operating in ASEAN.

The digital economy’s growth across the region will accelerate when negotiations on the ASEAN Digital Economy Framework Agreement are substantially concluded in 2025, DPM Gan said.

Singapore also plans to conclude and sign the upgrade to the ASEAN Trade in Goods Agreement in 2025, which will boost intra-ASEAN trade flows and strengthen supply chain connectivity.
 

Rising trade frictions

Geopolitical tensions and trade frictions have risen since US President Donald Trump took office on 20 January.

Since then, Mr Trump has implemented a series of protectionist measures, including a 25 per cent tariff on goods imported from Mexico and Canada. He has also imposed an additional 10 per cent duty on shipments from China, following a similar hike in February.

The moves sent shock waves through global trade, sparking fears of recession, surging consumer prices and logistical chaos. In response, China and Canada have imposed their own tariffs.

Mr Trump is considering imposing reciprocal tariffs on all trading partners, aimed at offsetting not just their levies on US goods, but also non-tariff barriers such as unfair subsidies, regulations, value-added taxes, exchange rates, lax intellectual property protections, and other factors that limit US trade.

DPM Gan said: “This may lead to an escalating, tit-for-tat cycle of tariffs, or worse, a global trade war. This could upend the global rules-based economic order that Singapore, as a small and open country, is dependent on.”
 

Singapore may not be directly hit by the proposed reciprocal tariffs, given no tariffs are imposed on US imports here and the balance of trade is in favour of the US.

“However, the impact of rising tariffs and trade wars could cause disruptions to supply chains, slow down global trade and drive up business costs and, therefore, affect businesses and consumers.

“In the longer term, it will also affect confidence and investment flows and slow down the global economy,” DPM Gan said.

On top of the trade war, many countries are also competing aggressively against each other for investments and protecting their domestic industries, he said. “This will lead to a more challenging external environment for us.”

Beyond these immediate challenges, Singapore also faces longer-term domestic constraints to economic growth such as land, labour, and carbon.

He said local workforce growth may continue to slow in the coming years, while limited land means Singapore will need to find new ways to maximise space utilisation.

To play its part on climate change, Singapore will also need to reduce its carbon footprint, while accommodating growing energy demand as the Republic’s economy expands.

DPM Gan said Singapore may face economic uncertainties and even disruptions in the months and years ahead. Hence, it must further strengthen its competitive edge through innovation, deeper integration with the region and with the world, and investments in building strong enterprises and a skilled workforce.

“This is how we will earn our living and standing in an increasingly uncertain and unfavourable external environment.”
 

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