Gross domestic product grew 3.9% in the three months through March from a year earlier, the Ministry of Trade and Industry said in its final estimate on Thursday. The figure compares with a median forecast of a 3.6% growth in a Bloomberg survey of economists, and the government’s advanced estimate of 3.8%.

On a seasonally adjusted quarterly basis, GDP fell 0.6%, versus a forecast of 1% contraction. The Singapore dollar and  the benchmark Straits Times Index were little changed following the report.

The MTI maintained a recently downgraded forecast for 2025 GDP growth at 0%-2% as U.S. tariffs clouded the outlook for global trade. Prime Minister Lawrence Wong earlier warned that a recession can’t be ruled out.

“A technical recession where you have two quarters of consecutive quarter-to-quarter negative growth, that is a possibility,” Beh Swan Gin, permanent secretary at the trade ministry, told reporters. “That doesn’t necessarily equate to a full-blown economic recession” as seen in the year-on-year GDP numbers.

The last time Singapore had a technical recession was at the height of the COVID-19 pandemic in 2020. Prior to that the city-state had four straight quarterly contractions from the June quarter of 2008.

The better-than-expected result in the first quarter was driven by manufacturing and export activity as businesses rushed to avoid the imposition of higher U.S. tariffs.

That momentum is now at “risk of fading,” said Charu Chanana, the chief investment strategist at Saxo Markets, adding that “fiscal buffers and proactive policymaking in Singapore offer room to cushion any external shocks.” 

The data shows how the U.S.-China trade war and China’s sluggish recovery were seeping deeper into the region at the start of the year. Since then, the world’s two biggest economies have called a truce, agreeing to a 90-day negotiating window under which they have lowered tariffs on each other’s goods.

“The global economic outlook remains clouded by significant uncertainty, with the risks tilted to the downside,” Beh said.

The uncertainty could lead to a larger-than-expected pullback in economic activity, he said, adding that a re-escalation of tariff actions may trigger a full-blown global trade war. He also warned that disruptions to the global disinflation process and recession risks could destabilize capital flows.

Against this background, the growth of “outward-oriented sectors” such as manufacturing, wholesale trade, transportation and storage, is expected to slow this year. Finance and insurance sectors are also likely to be weighed down by weaker trading activity while the outlook for consumer-facing sectors is lackluster.

With trade accounting for about three times its GDP, Singapore remains acutely exposed to any sustained slowdown in global commerce. The trade ministry said it will adjust its growth forecast as needed.

The Monetary Authority of Singapore will make a “comprehensive assessment” in the run-up to its July policy meeting, MAS Deputy Managing Director Edward Robinson said at the same briefing.

“The policy stance remains appropriate as of now,” he said.

Last month, the MAS eased its monetary policy settings for the second time this year.

Bloomberg Economics expects a 0.9% growth this year, though it sees some upside risk from the 90-day U.S.-China trade truce. Another supportive factor for Singapore was the outcome of this month’s election. 

“The strong showing of Singapore’s ruling People’s Action Party in the general election on May 3 reduces uncertainty at a critical juncture—as businesses and investors navigate U.S. President Donald Trump’s upending of global trade and security relationships,” said Tamara Mast Henderson, ASEAN economist for Bloomberg Economics.