SINGAPORE: Singapore upgraded its economic growth forecast for 2026 on Tuesday (Feb 10) as it announced that gross domestic product grew 5 per cent last year.
The economy is now expected to grow by 2 per cent to 4 per cent this year, up from the previous forecast of 1 per cent to 3 per cent.
The full-year GDP growth figure for 2025 beat the Ministry of Trade and Industry's (MTI) advance estimate of 4.8 per cent, which was released last month, but was slightly lower than 2024's 5.3 per cent growth.
MTI also said the Singapore economy grew 6.9 per cent year-on-year in the fourth quarter of 2025, faster than the 4.6 per cent expansion recorded in the third quarter.
On a quarter-on-quarter seasonally adjusted basis, the economy grew by 2.1 per cent, a moderation from the 2.6 per cent growth in the previous quarter.
The ministry said its previous GDP growth projection in November 2025 was based on the expectation that economic activity would ease in major economies this year as US tariffs worked their way through the global economy.
However, most major economies turned in stronger-than-expected growth in the fourth quarter of 2025.
"Notably, global trade activity remained resilient despite the US tariffs, likely reflecting effective US tariff rates that were lower than the announced headline rates, trade diversion facilitated by supply chain adjustments, and robust (artificial intelligence-related) exports amidst the AI investment boom," said MTI.
GDP growth for 2025 was mainly driven by the manufacturing, wholesale trade and finance and insurance sectors. In particular, the electronics cluster of the manufacturing sector and the machinery, equipment and supplies segment of the wholesale trade sector grew robustly on account of strong AI-related electronics demand, the ministry said in its news release.
The finance and insurance sector saw broad-based growth across all segments, but the food and beverage services sector contracted, partly due to a decline in the sales volume of restaurants as dining preferences shift.
The momentum seen in the last quarter is expected to be carried into 2026, the ministry said. Besides the AI investment boom, economies such as the US, Germany and Japan are expected to see expansionary fiscal policies. Accommodative global financial conditions should also support global growth in the quarters ahead.
"Taking these factors into account, the GDP growth outlook for Singapore’s key trading partners for 2026 has improved compared to the outlook in November," said MTI.
For example, the electronics cluster in the manufacturing sector is projected to grow at a stronger pace than previously expected, supported by robust demand for semiconductor chips in the data centre end-market, and the information and communications sector will be supported by sustained enterprise demand for AI-enabled and other digital solutions.
The ministry said the pace of growth is still expected to ease from 2025 levels in part due to the drag from the full-year impact of US tariffs and rising trade barriers.
Outlining some upside and downside risks, MTI said a stronger-than-projected upswing in the AI investment cycle could provide a greater boost to electronics demand and drive further gains in equity markets, while a renewed escalation in tariff actions or flare-ups in geopolitical tensions could weigh on the sentiments of businesses and households.
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The economy is now expected to grow by 2 per cent to 4 per cent this year, up from the previous forecast of 1 per cent to 3 per cent.
The full-year GDP growth figure for 2025 beat the Ministry of Trade and Industry's (MTI) advance estimate of 4.8 per cent, which was released last month, but was slightly lower than 2024's 5.3 per cent growth.
MTI also said the Singapore economy grew 6.9 per cent year-on-year in the fourth quarter of 2025, faster than the 4.6 per cent expansion recorded in the third quarter.
On a quarter-on-quarter seasonally adjusted basis, the economy grew by 2.1 per cent, a moderation from the 2.6 per cent growth in the previous quarter.
The ministry said its previous GDP growth projection in November 2025 was based on the expectation that economic activity would ease in major economies this year as US tariffs worked their way through the global economy.
However, most major economies turned in stronger-than-expected growth in the fourth quarter of 2025.
"Notably, global trade activity remained resilient despite the US tariffs, likely reflecting effective US tariff rates that were lower than the announced headline rates, trade diversion facilitated by supply chain adjustments, and robust (artificial intelligence-related) exports amidst the AI investment boom," said MTI.
GDP growth for 2025 was mainly driven by the manufacturing, wholesale trade and finance and insurance sectors. In particular, the electronics cluster of the manufacturing sector and the machinery, equipment and supplies segment of the wholesale trade sector grew robustly on account of strong AI-related electronics demand, the ministry said in its news release.
The finance and insurance sector saw broad-based growth across all segments, but the food and beverage services sector contracted, partly due to a decline in the sales volume of restaurants as dining preferences shift.
The momentum seen in the last quarter is expected to be carried into 2026, the ministry said. Besides the AI investment boom, economies such as the US, Germany and Japan are expected to see expansionary fiscal policies. Accommodative global financial conditions should also support global growth in the quarters ahead.
"Taking these factors into account, the GDP growth outlook for Singapore’s key trading partners for 2026 has improved compared to the outlook in November," said MTI.
For example, the electronics cluster in the manufacturing sector is projected to grow at a stronger pace than previously expected, supported by robust demand for semiconductor chips in the data centre end-market, and the information and communications sector will be supported by sustained enterprise demand for AI-enabled and other digital solutions.
The ministry said the pace of growth is still expected to ease from 2025 levels in part due to the drag from the full-year impact of US tariffs and rising trade barriers.
Outlining some upside and downside risks, MTI said a stronger-than-projected upswing in the AI investment cycle could provide a greater boost to electronics demand and drive further gains in equity markets, while a renewed escalation in tariff actions or flare-ups in geopolitical tensions could weigh on the sentiments of businesses and households.
Continue reading...