Singapore revises 2025 GDP growth to 5% from 4.8% earlier, bolstered by a strong Q4

[SINGAPORE] The Republic’s economy grew 5 per cent in 2025, higher than the advance estimate of 4.8 per cent, data from the Ministry of Trade and Industry (MTI) showed on Tuesday (Feb 10) morning.

This was a slowdown from 2024’s full-year growth figure of 5.3 per cent, but still exceeded MTI’s official full-year forecast of “around 4 per cent”.

For 2026, MTI now expects the economy to grow by 2 to 4 per cent, up from 1 to 3 per cent previously.

The upward revision for 2025’s gross domestic product growth came as fourth-quarter growth was adjusted upwards to 6.9 per cent year on year, from the advance estimate of 5.7 per cent. This was faster than Q3’s revised 4.6 per cent expansion.

On a quarter-on-quarter seasonally adjusted basis, the economy expanded by 2.1 per cent in Q4, revised up from the advance estimate of 1.9 per cent. But this was still a moderation from Q3’s revised 2.6 per cent growth rate.

For the whole of 2025, GDP growth was largely driven by the manufacturing, wholesale trade, and finance and insurance sectors, said MTI.

In particular, the manufacturing sector’s electronics cluster and the wholesale trade sector’s machinery, equipment and supplies segment grew robustly, led by strong artificial intelligence (AI)-related electronics demand.

All segments of the finance and insurance sector recorded broad-based growth amid largely accommodative financial conditions, but the food and beverage services sector shrank.

Improved global outlook

For 2026, MTI’s upgraded growth forecast range of 2 to 4 per cent factored in the latest global and domestic situations.

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It said that the forecast range of 1 to 3 per cent, announced in November, was based on the expectation that GDP growth in major economies would ease in 2026 on the back of US tariffs.

The higher 2026 growth forecast would hardly have been a surprise for the Monetary Authority of Singapore (MAS), said Barclays economist Brian Tan.

This is considering that the central bank would have likely already factored in “a more upbeat” growth outlook when it left monetary policy settings unchanged in its January review, he said.

Most economists upgraded their 2026 growth forecasts, which fall within the revised official range of 2 to 4 per cent.

Tan raised his full-year projection to 3.5 per cent from 2.5 per cent. OCBC chief economist Selena Ling raised hers to 3 per cent from 2 per cent, on account of the “brighter” outlook from the continuing AI investment boom.

On the upper end were Maybank economists Chua Hak Bin and Brian Lee, and UOB associate economist Jester Koh. They now expect 2026 GDP growth to be 3.6 per cent, up from Maybank’s previous forecast of 2.8 per cent, and UOB’s 2.6 per cent.

On the lower end was DBS senior economist Chua Han Teng, who raised his growth forecast to 2.8 per cent, from 1.8 per cent. Standard Chartered economists Edward Lee and Jonathan Koh kept their forecast at 3.2 per cent.

MTI said the global economy has outperformed expectations since November, with most major economies turning in stronger-than-expected growth in Q4 2025.

Notably, global trade activity stayed resilient despite the US tariffs, likely from the effective rates being lower than the announced headline rates, trade diversion facilitated by supply chain adjustments, and robust AI-related exports amid the AI investment boom.

At a media briefing, MTI chief economist Yong Yik Wei said the ministry had underestimated the strength of AI-related electronics demand in its forecasts for Singapore’s 2024 and 2025 full-year growth.

MTI has thus factored in sustained momentum from the AI investment boom in its revised 2026 growth forecast, she said. Apart from that, global growth in 2026 will be supported by expansionary fiscal policies in advanced economies and accommodative global financial conditions.

Considering these factors, the GDP growth outlook for Singapore’s key trading partners for 2026 has improved.

But MTI expects growth for most of these economies to ease from 2025 levels, partly due to drag from the full-year impact of the US tariffs and rising trade barriers that could weigh on non-AI-related global trade.

GDP growth in the US is projected to be “broadly stable” in 2026, even as the eurozone’s GDP growth is tipped to weaken from subdued exports and industrial activity.

In Asia, China’s growth is expected to moderate; among the key South-east Asian economies, growth should be supported by consumption and investment.

Tightening on the horizon

Asked about the likelihood of monetary policy tightening in April, MAS chief economist Edward Robinson reiterated the January policy statement, saying that the central bank is in an “appropriate position” to respond effectively to any risks to medium-term price stability.

Several economists expect monetary policy to be tightened in 2026, probably in April.

Maybank’s Dr Chua and Lee expect the central bank to steepen the Singapore dollar nominal effective exchange rate (S$NEER) appreciation bias slightly in April.

“With growth likely to remain above trend in 2026, the output gap will likely widen and increase services and cost pressures,” they said. This would prompt MAS to tighten its policy “earlier rather than later”.

Similarly, UOB associate economist Jester Koh expects the output gap to remain “significantly” positive in 2026, reinforcing his base case for the S$NEER slope to be steepened by 50 basis points (bps) to 1 per cent per annum in April.

While an April move is not Ling’s base case, the OCBC chief economist is not ruling out a tightening of monetary policy in 2026.

This is on account of the “more sanguine” growth outlook and risk of core inflation rising over the course of 2026, stemming from tight domestic labour market conditions and upticks in electricity, utilities and transport costs, alongside higher carbon taxes.

MTI Permanent Secretary for energy and Trade Augustin Lee flagged that the global economic outlook is subject to both upside and downside risks, so the ministry will monitor developments and adjust the forecast if needed.

On the one hand, a stronger-than-projected upswing in the AI investment cycle could boost electronics demand and spill over positively to global trade, and drive further gains in equity markets that could lift global consumption.

On the other, a renewed escalation in tariff actions or geopolitical tensions could lead to a resurgence in economic uncertainty, which could dampen business investments and household spending.

Furthermore, an escalation in risk-off sentiments or a sudden pullback in global AI-related capital spending could trigger sharp corrections in global financial markets, which could spill over to broader economic activity.

Citing MTI’s warning on the possible pullback in AI-related demand, Barclays’ Tan said MAS remains cautious about the sustainability of the AI boom and the risks it poses to the growth outlook.

It is this concern, he added, that is likely restraining the central bank from “immediately” tightening monetary policy. His base case is for monetary policy tightening to occur in July, through a steepening of the slope by 50 bps to 1 per cent.

Sectoral performance

Against this backdrop, the 2026 outlook for Singapore’s manufacturing and trade-related services sectors has improved since November, said MTI.

Within manufacturing, the linchpin electronics cluster is expected to grow more strongly than expected, backed by robust demand for semiconductor chips in the data centre end market.

This will spill over to the precision engineering cluster and the wholesale trade sector’s machinery, equipment and supplies segment.

In transport engineering, growth will be driven by strong order books in the aerospace, and marine and offshore engineering segments.

Meanwhile, key outward-oriented services sectors could grow strongly. Information and communications will be backed by sustained enterprise demand for AI-enabled and other digital solutions, and finance and insurance, by supportive macroeconomic and financial conditions.

But DBS’ Chua flagged that global trade could be restrained by the lagged effects of US tariffs, which remain higher globally than before President Donald Trump’s second term.

These lingering external tariff headwinds are likely to threaten Singapore’s non-electronics exports, he said.

Among the domestically oriented sectors, the construction sector is expected to grow steadily due to expansions in public residential building and civil engineering works. New private residential launches will also support the activities of real estate developers in 2026.

However, consumer-facing sectors such as retail trade and F&B services are likely to remain subdued, said MTI, partly the result of locals diverting their spending overseas and a shift in dining preferences.