Singapore raises 2025 GDP growth forecast to around 4%, projects 1-3% growth in 2026

The Ministry of Trade and Industry (MTI) has upgraded Singapore's economic growth forecast for the year to around 4 per cent on the back of better-than-expected performance in the third quarter of 2025.

The revision from a projected 1.5 to 2.5 per cent is due to "global economic conditions turning out to be more resilient than expected", said the ministry in a press release on Friday (Nov 21).

Meanwhile, MTI expects Singapore's gross domestic product (GDP) growth for 2026 to come in at a slower 1 to 3 per cent.

4.2% growth in Q3

Singapore's economy grew by 4.2 per cent year-on-year in the third quarter of 2025, extending the 4.7 per cent growth in the previous quarter, said MTI.

MTI first upgraded the growth forecast for 2025 in August due to the pause in the US' reciprocal tariffs and an improved outlook for Singapore's external demand due to the de-escalation in trade tensions between the US and several of its trading partners. 

The ministry had expected global growth to slow down in the second half of the year, as front-loading activities tapered off and with the resumption of US reciprocal tariffs. 

But GDP growth in most of Singapore's key trading partners came in better than expected in the third quarter of the year, amid ongoing trade diversion and supply chain adjustments.

"At the same time, the stronger-than-anticipated AI boom provided support for US economic growth, and for the exports of AI-related semiconductors from the region," said MTI.

MTI also noted further de-escalations in trade tensions, especially with the US-China trade truce being extended to November 2026 and a slower than expected rollout of sectoral tariffs.

Trade-related sectors such as the manufacturing and wholesale trade subsequently outperformed expectations, with positive spillovers to other sectors of the economy, including outward-oriented services sectors such as information and communications.

"For the rest of the year, demand for AI-related electronics should continue to support our manufacturing and wholesale trade sectors," MTI said, adding that growth in outward-oriented services sectors is also projected to remain resilient.

This is the second upgrade to Singapore's growth forecast for 2025 since being slashed to a range of 0 to 2 per cent in April following major uncertainty caused by the onset of US tariffs.

1 to 3% growth for 2026

MTI expects lower economic growth for most of Singapore's key trading partners next year, with the impact of US tariffs more pronounced.

"The slowdown in growth in major economies will moderate the demand for exports from Southeast Asia. Consequently, GDP growth among key Southeast Asian economies is expected to ease, although stable domestic demand should provide some support," said MTI.

The ministry also flagged downside risks that remain, such as a renewed escalation in tariff actions or geopolitical tensions that could weigh on global sentiments and even trigger sharp corrections in financial markets.

Manufacturing and trade-related services sectors in Singapore are projected to expand at a slower pace next year compared to 2025, said MTI, adding that semiconductor firms may face headwinds amid uncertainty over sectoral tariffs from the US.

However, MTI expects bright spots for the construction sector, which will be spurred by expansions in public residential building and civil engineering works.

"MTI will continue to monitor developments in the global and domestic economies closely, and make adjustments to the forecast if necessary over the course of the year," said MTI's permanent secretary Dr Beh Swan Gin.

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dana.leong@asiaone.com