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

Singapore raised its 2025 economic outlook Friday after stronger growth in the third quarter, but warned that expansion is likely to cool in 2026 as the U.S. tariffs weigh on global demand.

The Ministry of Trade and Industry upgraded Singapore’s 2025 GDP forecast to around 4%, up from an earlier range of 1.5% to 2.5%, largely thanks to the better-than-expected economic growth in the third quarter.

“Global economic conditions have turned out to be more resilient than expected,” the MTI said in a statement, citing stronger demand from key trading partners, stronger demand for semiconductor exports tied to the artificial-intelligence boom and the de-escalation in U.S.-China trade tensions.

The economy grew 4.2% in the July-to-September period from a year earlier, extending the second quarter’s 4.7% increase, government data showed. The third-quarter growth rate also exceeded the official advance estimate of 2.9% compiled in October and economists’ forecast of 4.0% in a Reuters poll, despite elevated trade headwinds during the three months.

For 2026, the authorities expected Singapore’s economy to grow at a range of 1% to 3%.

On a quarter-on-quarter, seasonally adjusted basis, GDP expanded 2.4%, up from 1.7% in the second quarter.

The third-quarter growth was mainly driven by manufacturing and export demand, the government said, noting that electronics manufacturing expanded by 6.1%, buoyed by higher demand for AI-related semiconductors and servers.

“For the rest of the year, demand for AI-related electronics should continue to support our manufacturing and wholesale trade sectors,” the ministry said.

For the first nine months of 2025, the economy grew 4.3% from a year earlier.

Although Singapore’s economy is expected to hold up relatively well this year, officials cautioned that the growth outlook remains clouded for 2026.

“GDP growth for most of Singapore’s key trading partners is likely to be lower than that in 2025 as the impact of the US’ tariffs is expected to be more pronounced,” the MTI said, cautioning that global economic uncertainty remains elevated.

Singapore’s exports to the U.S. are subject to a 10% baseline tariff, relatively low compared with the rates imposed on its Southeast Asian neighbors.

But sectoral levies, including a 100% tariff on branded drugs that has been put on hold, remain a key source of worry for Singapore’s economy.

“For now, there’s still not a lot of clarity around how America intends to apply these sectoral tariffs – for example, where pharmaceuticals are concerned,” Prime Minister Lawrence Wong said last month, noting that Singapore’s trade talks with Washington were at “a very early stage.”

The implementation of this tariff has been delayed to allow pharmaceutical companies time to negotiate exemptions with the U.S. administration.

In the third quarter, non-oil domestic exports (NODX) slipped 3.3% after a 7% rise in the April-to-June period, weighed down by weaker pharmaceutical and petrochemical exports. Shipments to the U.S. fell 30.7% over the same period.

But in October, NODX rebounded, surging 22.2% from a year earlier, driven by exports of non-monetary gold and electronic products. Shipments to the U.S. declined 12.5% in October from a year earlier.

The Monetary Authority of Singapore is expected to keep its monetary policy stance unchanged in its next meeting in January, as the growth momentum remains largely intact, Lloyd Chan, a strategist at MUFG Bank, said in a note Friday.

The central bank left the policy unchanged at its final review of the year in October, citing stable economic performance and subdued inflation.

Singapore’s consumer price inflation rose 0.7% in September from a year earlier, in line with the central bank’s estimate of 0.5% to 1% this year.