In its September 2025 Economic Review, the Ministry said that while recent policy measures and structural reforms are expected to bolster economic momentum, the external environment remains challenging.
“Uncertainties warrant caution and will continue to affect external demand, presenting downside risks to the growth outlook,” the report noted.
Domestic outlook upbeat on GST cuts, reforms
Looking ahead, the Ministry said that the recent reduction in GST rates is expected to have a positive impact on consumption and investment by lowering the tax burden on consumers and businesses. This, along with a strong performance in industries and services and a stable labour market, is likely to strengthen domestic demand and boost employment generation.
The review also underscored the government’s focus on growth-enhancing structural reforms—including the proposed GST 2.0 framework—which are expected to mitigate the negative spillovers from a weaker global environment.
Global economy: fading resilience behind the headline numbers
On the external front, the Finance Ministry observed that the global economy continues to operate under “a fog of uncertainty”, with several transitory factors that propped up growth earlier this year now fading.
According to the review, global growth had shown short-term resilience in the wake of trade policy disruptions, aided by a lower effective tariff rate in the US, frontloading of trade, and a weaker US dollar which helped exports.
The Ministry cited IMF assessments that US households and businesses frontloaded consumption and investment in anticipation of higher tariffs, while delays in tariff implementation helped defer price hikes. These developments helped stabilize global growth forecasts for 2025, bringing them back to levels projected in October 2024.
However, the Ministry warned that this momentum appears to be losing steam. “Recent resilience masks structural weaknesses which are coming to the fore,” it said, saying that core inflation and unemployment have risen in the US, while China’s export growth has moderated amid a struggling property sector. The Eurozone’s growth impulse remains muted, reflected in stagnant growth projections for 2026.
