Singapore central bank eases policy as U.S. tariffs threaten growth

Singapore's central bank eased monetary policy for the second time this year on Monday, citing a bleak outlook for global growth and trade amid the impact of U.S. tariffs and a cut in its trade forecast for the city-state.

The Singapore government cut its growth forecast for Singapore to 0% to 2% in 2025 from 1% to 3% previously, citing advance data showing a seasonally adjusted 0.8% contraction in GDP in the first quarter and a notably weaker outlook for external demand.

Singapore is one of the most open economies in the world, with its international trade volume far exceeding its domestic economy. It is often seen as a barometer of global economic growth.

The Monetary Authority of Singapore (MAS) said it would slightly reduce the current appreciation range of the exchange rate-based policy band, known as the nominal effective exchange rate (S$NEER).

The width and center height of the band are said to have not changed.

The central bank said exporters hit by tariffs would face weaker demand and price cuts for their products, while global financial conditions had tightened as asset markets began to reprice risks to the global economy.

"These factors will have broad-based, and potentially intensifying, drags on production, trade and investment among Singapore's major trading partners," the Monetary Authority of Singapore said.

"A sudden or prolonged weakening in global trade would have a significant impact on Singapore's trade-related sectors, and therefore the broader economy," the Monetary Authority of Singapore said.

Economists said that given the central bank's dovish rhetoric, they did not rule out another round of easing in the second half of the year if economic conditions worsen.

OCBC Bank economist Selena Ling said the Monetary Authority of Singapore is still allowing the Singapore dollar's nominal effective exchange rate to appreciate to "leave some wiggle room" and avoid overreacting, "as many external uncertainties are driven by tariffs and policy statements have been erratic, so the ultimate hit to growth and inflation remains difficult to predict."

DBS Bank economist Philip Wee said the central bank was "monitoring significant global trade risks but has not yet concluded that they will lead to a global recession".

Compared with the same period last year, the economy grew 3.8% in the first quarter, down from 5.0% in the fourth quarter and 4.4% in 2024.

Maybank economist Chua Hock Bin said if a technical recession occurs, policy could be further eased to a neutral bias in the second half of the year, but he "expects a slowdown rather than a recession at this stage".

On Monday, the central bank revised its 2025 core and headline inflation forecasts to 0.5% to 1.5%, respectively, from 1% to 2% and 1.5% to 2.5% previously.