Singapore raises annual growth forecast as third-quarter GDP tops expectations

Singapore's Ministry of Trade and Industry upgraded its 2025 GDP forecast to about 4% (from 1.5–2.5%) after third‑quarter GDP outperformed expectations at 4.2% year‑on‑year (QoQ SA +2.4%), with manufacturing—particularly electronics—expanding 6.1% on stronger AI‑related semiconductor and server demand. However, policymakers warned growth will likely cool to 1–3% in 2026 as US tariffs and sectoral levies (including a deferred 100% tariff on branded drugs) threaten external demand; non‑oil domestic exports fell in Q3 before rebounding in October, exports to the US remain weak, inflation is subdued (0.7% in September), and the Monetary Authority of Singapore is expected to keep policy steady.

Analysis

The Ministry of Trade and Industry upgraded Singapore's 2025 GDP forecast to around 4% (from a prior 1.5%–2.5%) after third‑quarter GDP rose 4.2% year‑on‑year, beating the official advance estimate of 2.9% and a Reuters poll median of 4.0%; quarter‑on‑quarter seasonally adjusted growth accelerated to +2.4% from +1.7% in Q2 and the economy expanded 4.3% in the first nine months of 2025. Manufacturing was the principal driver, with electronics output up 6.1% as stronger demand for AI‑related semiconductors and servers boosted exports and wholesale trade.

Authorities warned that growth is likely to slow to 1%–3% in 2026 as U.S. tariffs and sectoral levies (including a deferred 100% tariff on branded drugs) introduce trade uncertainty; non‑oil domestic exports fell 3.3% in Q3 after a 7% rise and shipments to the U.S. plunged 30.7% over that quarter (still down 12.5% in October), though October NODX rebounded +22.2% driven by non‑monetary gold and electronics.

Inflation remains subdued at 0.7% in September and the Monetary Authority of Singapore is expected to keep policy unchanged, implying limited near‑term monetary tightening. The combination of strong near‑term AI‑led export momentum and clear 2026 downside risk from trade policy argues for selective exposure and active monitoring of tariff implementation, export data and MAS guidance.

Key Decisions for Investors

• Consider selective overweight exposure to Singapore industrials and electronics supply‑chain names that benefit directly from AI‑related semiconductor and server demand, while sizing positions to reflect policy risk
• Avoid or hedge concentrated exposure to Singapore exporters with high U.S. revenue or pharmaceutical exporters until the scope and application of U.S. sectoral tariffs become clearer
• Monitor monthly NODX, shipments to the U.S., and MTI/MAS commentary as leading indicators for a 2026 growth re‑rating and be prepared to reduce cyclical exposure if export weakness reappears
• Maintain modest duration and FX caution given MAS is likely to keep policy steady; use options or short hedges if portfolio beta to global trade risk is high