Singapore has loosened its monetary policy for the second consecutive time, with the Monetary Authority of Singapore (MAS) acting amid mounting concerns that the city-state could experience zero economic growth in 2025, CNBC reported. The move follows a weaker-than-anticipated GDP increase of 3.8% in the first quarter, falling short of the 4.3% forecast by economists and lower than the 5% expansion recorded in the final quarter of 2024.

In its latest policy statement, MAS announced a reduction in the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, though it will maintain a path of gradual appreciation. The central bank’s strategy involves managing the Singapore dollar against a basket of currencies within a disclosed policy band, rather than setting a fixed rate.

The Ministry of Trade and Industry (MTI) simultaneously downgraded its GDP growth forecast for 2025 to a range of 0%–2%, down from a prior projection of 1%–3%. The ministry attributed the slowdown to contractions in the manufacturing sector and key services such as finance and insurance, industries that contribute 17% and 14% respectively to the national economy.

MTI also cited growing global headwinds, including heightened US tariffs and a deteriorating trade relationship between the United States and China. These external shocks are expected to weaken demand, hurting Singapore’s export-driven economy and diminishing net fee income across financial services.

MAS has also revised its inflation expectations downward. Headline inflation is now expected to average 0.5%–1.5% in 2025, compared to the earlier 1.5%–2.5% range. Core inflation, which excludes private transport and accommodation, is also forecast to ease to 0.5%–1.5%.

Maybank economist Brian Lee noted the policy shift was anticipated given the subdued global environment and moderating inflation. While he acknowledged that Singapore, as a vital hub in global supply chains, is highly vulnerable to tariff shocks, he believes the country will avoid recession, projecting GDP growth of 2.1% for 2025.