DBS expects Singapore GDP to double by 2040, Singapore dollar parity with greenback

DBS Group Research projects Singapore's gross domestic product to more than double to $1.2-$1.4 trillion by 2040 from $547 billion in 2024, driven by an average annual real GDP growth of 2.3% that is expected to outpace other advanced economies. The report also anticipates the Straits Times Index potentially climbing to nearly 10,000, surpassing 4,000 in 2025, and the Singapore dollar reaching parity with the U.S. dollar, attributing this long-term appreciation to disciplined policy, safe-haven capital inflows, and sustained productivity gains, further supported by the Monetary Authority of Singapore's S$5 billion equity market development program.

Analysis

DBS Group Research projects a robust long-term outlook for Singapore, forecasting its gross domestic product to more than double to $1.2-$1.4 trillion by 2040, up from $547 billion in 2024. This growth is underpinned by an anticipated average annual real GDP growth of 2.3% over the next 15 years, which is expected to significantly outpace other advanced economies. Key drivers cited include disciplined policy, sustained productivity gains, safe-haven capital inflows, and a persistent current account surplus.

The report also indicates a bullish medium-term shift for the Straits Times Index, projecting it to surpass 4,000 in 2025 and potentially climb to nearly 10,000. Concurrently, the Singapore dollar is expected to reach parity with the U.S. dollar, driven by these long-term currency appreciation factors. These projections collectively highlight a strong positive outlook for Singapore's financial markets and currency strength.

Further bolstering this optimistic forecast, the Monetary Authority of Singapore (MAS) is implementing a S$5 billion ($3.86 billion) equity market development program. This initiative specifically aims to revitalize the market and enhance liquidity, particularly within small- and mid-cap stocks. This policy support underscores a concerted effort to strengthen Singapore's capital markets and foster sustained growth.

Key Decisions for Investors

• Investors should consider increasing long-term strategic allocations to Singaporean equities and fixed income, given the projected doubling of GDP by 2040 and a potential STI climb to 10,000.
• Monitor the Singapore dollar's appreciation trajectory towards parity with the U.S. dollar, which could offer currency gains for foreign investors or necessitate adjustments to FX hedging strategies.
• Evaluate potential enhanced opportunities within Singapore's small- and mid-cap stock segments, as the MAS's S$5 billion equity market development program aims to boost liquidity and market revitalization in this area.