Singapore’s Ministry of Trade and Industry (MTI) announced on Sunday (Dec. 21) that Singapore’s gross domestic product (GDP) growth forecast for 2025 has been upgraded from 1.5 to 2.5 per cent to around 4 per cent, largely reflecting the better-than-expected performance of Singapore’s economy in 3Q.
In 3Q, Singapore’s GDP grew by 4.2 per cent, slower than 2Q’s growth of 4.7 per cent.
On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 2.4 per cent, faster than the 1.7 per cent expansion in 2Q.
“On a year-on-year basis, GDP growth in the third quarter of 2025 was mainly driven by the manufacturing, wholesale trade and finance & insurance sectors,” according to MTI.
Within the manufacturing sector, growth was led by the electronics, transport engineering, and biomedical manufacturing clusters.
The electronics cluster expanded by 6.1% per cent owing to a significant increase in the demand for AI-related semiconductors, servers and server-related products.
The biomedical manufacturing cluster grew by 8.9 per cent, supported by a higher-than-expected level of production of a key high-value active pharmaceutical ingredient.
For the wholesale trade sector, growth was largely due to robust sales volumes in the machinery, equipment & supplies segment, bolstered by the strong global demand for AI-related electronics.
Growth in the finance & insurance sector was supported by banks’ net fees and commissions as business and investor sentiments improved.
In August, “MTI had expected global growth to slow down in the second half of the year, with the dissipation of the boost from front-loading activities” in 2Q and the “reinstatement of the US’ reciprocal tariffs after the temporary pause.”
“The global economic conditions have turned out to be more resilient than expected,” MTI stated.
Besides the strong growth from the electronics, transport engineering and biomedical manufacturing clusters, MTI also cited a number of reasons for optimism for 2025’s GDP growth.
3Q’s strong performance was also due to the robust exports growth for regional economies such as China and Vietnam, amid ongoing trade diversion and the “stronger-than-anticipated AI boom provided support for US economic growth, and for the exports of AI-related semiconductors from the region.”
Further de-escalations in trade tensions in recent months also contributes to the 3Q economic growth. “Notably, the US-China trade truce has been extended to November 2026 with a reduced US tariff rate on China.”
These factors “generated positive spillovers to other sectors of the economy, including outward-oriented services sectors such as information & communications and professional services. MTI added that “the latter also benefitted from resilient demand for services from regional economies.”
“Demand for AI-related electronics should continue to support our manufacturing and wholesale trade sectors. Growth in outward-oriented services sectors such as information & communications, professional services, and finance & insurance is also projected to remain resilient.”
Downside Risks Remain in 2026
MTI said that downside risks remain in the global economy. Singapore’s GDP growth is projected to moderate to 1 to 3 per cent in 2026 as the impact of the US’ tariffs is expected to be more pronounced.
“China’s GDP growth is forecast to moderate on the back of slower exports growth and the boost provided by the consumer goods trade-in scheme fades.”
MTI also stated that “GDP growth in the Eurozone is also projected to slow as industrial activity weakens due to the US’ tariffs.”
The slowdown in growth in major economies will moderate the demand for exports from Southeast Asia and GDP growth in this region is expected to ease, MTI added.
MTI cited two downside risks which could weigh on the economy next year such as “renewed escalation in tariff actions or geopolitical tensions” and “an escalation in risk-off sentiments could trigger sharp corrections in global financial markets.”
The semiconductor equipment makers in the precision engineering cluster could face headwinds in the near term. In particular, semiconductor firms may take longer to commit to new capacity investments until there is greater certainty with respect to the US’ tariffs on semiconductors.
“Growth in consumer-facing sectors such as retail trade and food & beverage services is likely to remain subdued,” MTI said.
Bright spots are expected to remain in the manufacturing sector where growth in the electronics cluster is expected to be supported by the demand for AI-related semiconductors, servers and server-related products, which in turn will have positive spillover effects on the machinery, equipment & supplies segment of the wholesale trade sector.
The ongoing shift towards higher-value maintenance, repair & overhaul works in the aerospace segment as well as strong order books in the marine & offshore engineering segment will drive growth in the transport engineering cluster.
Both the information & communications and finance & insurance sectors are expected to register steady growth, reflecting the resilient enterprise demand for digital solutions and services, and supportive financial and macroeconomic conditions respectively.
“The construction sector is forecast to continue growing, supported by expansions in public residential building and civil engineering works.”
