Economic growth hits a two-year high in Q3

GDP growth jumps in Q3: A second release revealed that GDP growth gained traction, rising to 5.4% year on year in the third quarter, above a flash estimate of 4.1% and Q2’s 3.0%. The reading marked a two-year high. On a seasonally adjusted quarter-on-quarter basis, economic growth improved to 3.2% in Q3, following the previous period's 0.5% increase and marking the fastest increase since Q1 2021.

Private consumption and external sector underpin acceleration: Private consumption growth sped up to 6.9% in the third quarter (Q2: +6.2% yoy)—the best result since Q4 2022—boosted by a tight labor market and easing inflation. Additionally, government spending accelerated to 4.5% in Q3 (Q2: +2.8% yoy). Less positively, fixed investment ebbed to 2.5% in Q3, following the 2.7% expansion logged in the previous quarter. On the external front, net exports rebounded to 1.1% in Q3 (Q2: -10.7% yoy); exports of goods and services accelerated to 8.3% in Q3 (Q2: +7.9% yoy), while imports of goods and services waned to 9.7% (Q2: +12.0% yoy).

Exports to slow in 2025: Although it will continue to expand robustly, our Consensus is for the economy to lose some steam in Q4. Turning to 2025, GDP growth is set to decelerate from 2024’s projected level, as exports are likely to be hindered by incoming U.S. import tariffs under the Trump administration. That said, fixed investment will provide impetus, boosted by a lower interest rate environment.

Panelist insight: Commenting on the reading, Jester Koh, associate economist at United Overseas Bank, stated: “For the rest of 2025, the outlook is somewhat cloudy given uncertainty surrounding the extent and timing of Trump’s touted tariffs, heightened geopolitical tensions, possible peak in the electronics cycle and pace of monetary easing by major central banks globally. […] Activity in tourism-related sectors are likely to soften as tailwinds from the post-pandemic pent-up demand for these services dissipate.” On a more positive note, Han Teng Chua, analyst at DBS Bank said: “We expect major economies like the US to exhibit robust but slightly cooler GDP growth. […] This backdrop is underpinned by the ongoing global tech and electronics upcycle and the gradual reduction of global interest rates. We expect these positive global drivers to spill over positively to Singapore’s trade-related (manufacturing, wholesale trade, transport & storage) and modern services (finance & insurance and information & communications) sectors.”

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