Singapore’s economy grew in the second quarter of 2025, according to early reports from the trade ministry. The Gross Domestic Product (GDP) rose by 1.4% from the previous quarter, beating the expected 0.7%. This follows a revised drop of 0.5% in the first quarter. Compared to the same period last year, the GDP increased by 4.3%, surpassing the anticipated 3.5% and improving from the previous quarter’s 3.9% growth. This data shows that the economy is recovering and is not in a recession after the first quarter’s decline.

Signs of Economic Recovery

The initial data from Singapore’s trade ministry provides a positive outlook that many did not expect. The 1.4% quarter-on-quarter GDP growth indicates that economic activity is improving, especially after the earlier decline. This rebound comes after a downward revision in the first quarter, suggesting that domestic activity may be picking up faster than previously thought. The yearly growth of 4.3% also supports this trend compared to the expected 3.5%. Together, these figures lead to a reassessment of future rate expectations and market strategies. For traders, especially in rate derivatives, this means short-term interest rates may change. Earlier, traders had anticipated a slower recovery. Now, this new data prompts adjustments. Monetary officials are not likely to act right away based on these preliminary gains, but this cushion might lessen the urgency for policy changes and provide more clarity on when rates might be cut. This narrows the chances for unexpected easing soon. The stronger quarterly growth impacts curve positioning, especially at the short end. This increase puts pressure on existing flatteners and may support receiving interest in the middle of the curve if inflation stays low. Traders who bet on long-duration investments based on weak growth will need to re-evaluate their positions before the next monetary policy update.

Cross-Asset Effects

We cannot overlook the impact of external demand, especially in manufacturing and sectors sensitive to trade. These industries, often linked to regional supply chains, could provide insights into broader activity in Asia. Export growth has typically indicated overall economic performance, and this rise bolsters carry trades linked to regional currencies. In this environment, traders should avoid becoming too one-sided. Although the results are encouraging, forward guidance remains cautious. Fixed income desks should consider less exposure to rate volatility until we receive updates from upcoming inflation and labor data. Caution is necessary with monthly indicators. Leading surveys and inventory data will help determine if this growth is structural or cyclical. If the upward trend continues into the third quarter, we might need to revise earlier growth assumptions, which will, in turn, require adjustments to hedging strategies. Overall, the stronger-than-expected GDP challenges the defensive strategies seen in the first half of the year. We will closely monitor changes in term premia and relative value spreads, especially among regional curves. With momentum returning, markets will seek solid reasons for any dovish approaches. Keep an eye on upcoming macro releases since timing the next move will hinge on staying ahead of revisions. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now