Singapore posts stronger-than-expected 4.8% growth in 2025, but sustaining pace will be challenging: PM Wong

[SINGAPORE] The economy grew a stronger-than-expected 4.8 per cent in 2025, but sustaining this pace will be challenging, Prime Minister Lawrence Wong said in his New Year message on Wednesday (Dec 31).

“We will face more obstacles to growth, and inflationary pressures may intensify,” he warned.

The 4.8 per cent figure outstrips the Ministry of Trade and Industry’s forecast, made in November, of “around 4 per cent”.

The better-than-anticipated performance came as global economic growth proved more resilient than expected, noted PM Wong.

The United States imposed tariffs later and at lower levels than feared, and Singapore also gained from a surge in demand for semiconductors and electronics, related to artificial intelligence (AI).

This meant unemployment and inflation remained low, and real incomes rose across the board, he added.

But Singapore “must be realistic” about the difficulty of maintaining this growth rate, he warned: “Fractured trade and geopolitical tensions are not transient problems, but permanent features of a fragmented world.”

As a small and open economy, Singapore cannot fully shield itself from growth headwinds and inflationary pressures.

“To remain competitive, we cannot simply do more of the same,” he said. “We must rethink, reset and refresh our economic strategies.”

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He cited the economic strategy review led by Deputy Prime Minister Gan Kim Yong and a team of young officeholders, who will release the first set of proposals soon. The government will then respond to it at Budget 2026.

“Position of strength”

While Singapore faces more challenges and unknowns, “we can press on confidently, because we are dealing with them from a position of strength”, said PM Wong.

The Republic’s trusted international standing has attracted companies seeking stability amid global uncertainties. For instance, Microsoft chose to set up its first South-east Asian AI research lab in Singapore to drive cutting-edge research and develop solutions for industries.

Beyond major players, a growing number of promising startups and growth companies are making Singapore their launchpad into the region, he added.

“We have a window of opportunity to attract and anchor more dynamic enterprises.”

At the same time, Singapore’s reputation has opened doors for local businesses abroad. “From Africa to Latin America, our firms are carving out new niches and making their mark,” he said.

The government will continue to support these companies as they expand, scale up and seize overseas opportunities. 

Immediate concerns

“Even as we look outward for new opportunities, our focus remains firmly on improving lives here at home,” he said. “Economic success is a means to an end. What matters is that every Singaporean benefits from the nation’s progress.”

The government will work alongside the labour movement and employers to help workers grow and progress in their careers. Education, housing and healthcare will also be improved.

Social safety nets will be reinforced. This includes uplifting lower-income families through financial assistance and measures to “empower them to build a better future for themselves and their children”.

Persons with disabilities and their caregivers will also get more support. The government will improve their access to services, expand opportunities for meaningful work and independent living, and give families greater confidence to plan for the future.

Long-term challenges

PM Wong also highlighted three long-term challenges to be tackled.

First, the population is rapidly ageing, and birth rates are declining. The government will continue to support young Singaporeans who want to marry and have children, while staying open to new citizens.

Second, longer lifespans will have implications for healthcare, work and retirement.

A tripartite workgroup on senior employment is reviewing strategies for age-friendly workplaces, while retirement adequacy is also being strengthened for lower- and middle-income workers.

Third, Singapore will secure reliable clean-energy supplies to power energy-intensive industries of the future, including AI.

One strategy is to import green energy and work towards a longer-term goal of an Asean power grid. Singapore is also pursuing its own green-energy solutions, such as low-carbon hydrogen and nuclear energy.

“The challenges ahead are complex. They will require us to be bold, creative and open to new solutions,” said PM Wong.

While there will be “many discussions and robust debates”, Singaporeans must not let differences divide them, he said. “We must harness our diverse perspectives to chart a new path forward as one united people.”