Economists raise Singapore’s 2026 growth forecast to 3.6%, majority see MAS holding in April

[SINGAPORE] Private-sector economists have turned more optimistic about Singapore’s 2026 growth outlook, with a slight majority expecting monetary policy settings to remain unchanged at the upcoming April review, according to the Monetary Authority of Singapore’s (MAS) latest quarterly survey of professional forecasters released on Thursday (Feb 26).

They expect 2026 full-year gross domestic product growth to come in at 3.6 per cent, up from the 2.3 per cent projection in December’s survey. This is close to the upper end of the official forecast range of 2 to 4 per cent, which was upgraded by the Ministry of Trade and Industry on Feb 10.

This is based on the views of 22 economists who responded to the MAS survey of professional forecasters sent out on Feb 10.

For 2027, GDP growth is projected at 2.5 per cent.

The improved outlook for 2026 comes on the back of better full-year prospects for Singapore’s manufacturing as well as wholesale and retail trade sectors.

Manufacturing growth is forecast at 4.3 per cent, up from 3.6 per cent in the previous survey, while full-year export growth is projected at 4.5 per cent, more than double the earlier 2 per cent estimate.

Among other sectors, wholesale and retail trade is expected to grow 4 per cent, up from 2 per cent previously. 

Construction is projected to expand 5 per cent, unchanged from the last survey, while finance and insurance is seen growing 3.6 per cent, also unchanged.

Accommodation and food services is the only sector to see a downgrade, with growth forecast at 1.3 per cent, down from 1.6 per cent.

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Respondents expect the economy to expand by 5.8 per cent year on year in the first quarter. 

DBS senior economist Chua Han Teng said the upward revision to 2026 full-year GDP growth was likely partly driven by “positive carryover effects from stronger-than-anticipated growth momentum” in Q4 2025 into the first half of this year.

Fourth-quarter growth in 2025 had outperformed respondents’ expectations in the December survey. They had expected GDP to grow 3.6 per cent in Q4, but the eventual figure was 6.9 per cent.

Another factor cited by Chua, MUFG Bank’s currency strategist Lloyd Chan, and Moody’s Analytics economist Denise Cheok is the positive spillover impact of artificial intelligence (AI) related investments.

Cheok said while front-loading drove growth in the earlier part of 2025, the AI boom has been pushing up demand for semiconductors and other electronic components that feed into the tech ecosystem.

Indeed, the latest data from the Economic Development Board on Thursday showed that factory output jumped 16.6 per cent year on year in January on the back of a surge in electronics manufacturing, extending the previous month’s revised 10.9 per cent rise.

Meanwhile, data released on Feb 16 showed that the Republic’s non-oil domestic exports (NODX) had expanded by 9.3 per cent year on year in January, extending December’s 6.1 per cent growth. This was likewise driven by electronics shipments due to strong AI-related demand as well as a low base.

Looking ahead, Chan said this growth momentum looks “reasonably durable”. He added: “Over the medium term, sustaining above-trend growth would likely require spillovers from AI into productivity gains across non-tech sectors.”

Inflation expectation

Inflation expectations were little changed from December’s survey.

For 2026, headline inflation is projected at 1.5 per cent, unchanged from the previous round, while core inflation – which excludes accommodation and private transport – is forecast at 1.5 per cent, up from 1.3 per cent.

For 2027, the expectation for both headline and core inflation is 1.7 per cent.

Unemployment is expected to be 2.1 per cent by the end of the year, unchanged from the last survey.

While most respondents still expect no immediate change in monetary policy, expectations have shifted further towards tightening.

In the December survey, one respondent expected policy to be loosened in April via a reduction in the slope of the Singapore dollar nominal effective exchange rate policy band, while none anticipated easing in July or October. One respondent expected tightening in April, and two projected a tightening move in July.

In the latest survey, no respondents expect policy to be loosened in April or at the subsequent July and October reviews. Instead, 10 foresee tightening in April, five expect a move in July, and three anticipate tightening in October.

A majority of respondents expect policy to remain unchanged at each review. Eleven foresee no move in April, rising to 16 in July and 18 in October.

Risks to outlook

Geopolitical risks – including escalating trade tensions and wars – remain the most widely cited downside risk to Singapore’s economic outlook, named by 94.4 per cent of respondents. However, only 33.3 per cent ranked it as the top risk.

Chua said US trade policy uncertainty remains high, with US President Donald Trump’s administration pivoting to Section 122 of the Trade Act of 1974 and exploring other trade restrictions after the Supreme Court invalidated the use of International Emergency Economic Powers Act for tariffs.

OCBC’s chief economist Selena Ling added that uncertainty persists over the fate of bilateral trade deals, whether additional tariffs could be layered on, and the potential impact of sector or product-specific measures, such as on pharmaceuticals or semiconductors. “So there are still many moving parts and known unknowns,” she noted.

Nevertheless, Cheok pointed out that Singapore’s industrial production and NODX have remained “surprisingly resilient” despite US tariffs coming into effect in August.

While a potential burst of the AI bubble was cited by a smaller share (66.7 per cent), it was more frequently ranked as the top downside risk, with 55.6 per cent identifying it as such.

The risk of an external economic slowdown (27.8 per cent) was the third most-cited downside factor, though none of the respondents ranked it as the top risk.

However, an AI-led technology up-cycle was also the most common upside risk, cited by 94.4 per cent and named as the top risk by 83.3 per cent. Other upside risks were resilient global growth and an easing of trade tensions.

On AI featuring prominently on both sides of the outlook, Chan said it has the potential to deliver a productivity boost that lifts external demand and supports higher-value manufacturing and services.

On the downside, he cautioned that expectations could be running ahead of fundamentals, whether through over-investment or stretched stock valuations.

“Given Singapore’s strategic role in global electronics supply chains, any sharp reassessment of the AI theme would have an impact on growth,” he said.