Prepared February 2026 | Based on MTI, MAS and BEA Official Data
Executive Summary
Singapore’s economy delivered a standout performance in 2025, expanding by 5.0% for the full year — a remarkable outcome that substantially exceeded initial government forecasts of 0.0–2.0% and extended four consecutive years of positive growth. In sharp contrast, the United States recorded GDP growth of just 1.4% in Q4 2025 (annualised), weighed down by a 43-day government shutdown and softening consumer spending, with full-year 2025 growth of only 2.2%. This case study analyses the key drivers of Singapore’s economic outperformance, the structural vulnerabilities embedded in that growth, the policy outlook for 2026, and the broader economic and social impact on Singapore’s population and business environment.
Key Finding
Singapore’s 2025 GDP growth of 5.0% was powered primarily by a technology-led manufacturing surge — particularly AI-related semiconductors and pharmaceuticals — alongside resilient financial services. However, this growth remains concentrated, uneven, and exposed to geopolitical and trade risks that could materially alter the 2026 trajectory.
- GDP Growth Performance (2024–2025)
1.1 Headline Growth Figures
Singapore’s GDP grew at 5.0% in 2025, exceeding the Ministry of Trade and Industry’s (MTI) upwardly revised advance estimate of 4.8%. This accelerated from the 4.4% expansion recorded in 2024 and represented the strongest annual growth since 2021. Quarterly performance showed a notable acceleration in Q4 2025.
Quarter / Year YoY Growth (%) QoQ Growth (%) Key Driver
Q1 2025 4.5% 1.5% Electronics, Wholesale Trade
Q2 2025 4.7% 1.7% Finance & Insurance, Manufacturing
Q3 2025 (revised) 4.3% 2.4% Manufacturing, Wholesale Trade
Q4 2025 5.7% 1.9% Biomedical Mfg, AI Semiconductors
Full Year 2025 5.0% — Manufacturing, Trade, Finance
Full Year 2024 (prev.) 4.4% — Services-led recovery
1.2 Comparison with the United States
The divergence between Singapore and the US in 2025 is analytically significant. While Singapore accelerated, the US decelerated sharply in Q4 2025 to 1.4% (annualised) from 4.4% in Q3 2025, dragged down by a prolonged government shutdown and declining exports. The contrast highlights Singapore’s structural alignment with the AI technology supercycle, where its position as a semiconductor hub and data centre ecosystem gave it asymmetric upside exposure.
Indicator Singapore 2025 United States 2025
Full-Year GDP Growth 5.0% 2.2%
Q4 2025 Growth 5.7% YoY 1.4% annualised
Primary Growth Driver Manufacturing / AI Consumer Spending
Government Policy Impact Expansionary fiscal stance Shutdown drag (-70bps est.)
Core Inflation 1.0–2.0% (est. 2026) 3.0% PCE (Dec 2025)
- Sectoral Analysis
2.1 Manufacturing — The Engine of Growth
Manufacturing was the single most important driver of Singapore’s 2025 GDP growth. The sector posted 15.0% year-on-year growth in Q4 2025 alone, accelerating sharply from 4.9% in Q3. For the full year, the sector expanded at a robust pace driven by two key clusters:
Electronics Cluster: Sustained demand for AI-related semiconductors, servers, and server-related products drove extraordinary output. The infocomms and consumer electronics segment within this cluster expanded by 67.6% in Q3 2025 alone, reflecting Singapore’s deep integration into global AI infrastructure supply chains.
Biomedical Manufacturing: Pharmaceutical output surged, driven by production of key high-value active pharmaceutical ingredients. This cluster provides important diversification away from pure technology cyclicality.
Transport Engineering: Supported by higher-value maintenance, repair and overhaul (MRO) in aerospace and strong marine and offshore engineering order books.
2.2 Services Sectors
Services account for approximately 72% of Singapore’s GDP and delivered mixed but generally positive results in 2025:
Services Sector Performance Commentary
Wholesale & Retail Trade +3.9% (Q4 2025) Supported by AI-related machinery & equipment trade
Finance & Insurance +4.6% (Q3 2025) Driven by banking and auxiliary financial activities
Transportation & Storage +3.9% (Q4 2025) Rising container throughput, Changi air traffic
Information & Communications Steady growth Resilient enterprise demand for digital services
Food & Beverage Services Contracted (–0.9% FY2025) Extended structural weakness for second consecutive year
Retail Trade +0.7% (Q2 2025) Subdued domestic consumption environment
The persistent contraction in food and beverage services signals a structural domestic demand problem. Despite strong aggregate growth, cost-of-living pressures and subdued consumer sentiment among lower- and middle-income households are constraining domestically-oriented sectors — a pattern that mirrors the US experience of aggregate growth decoupled from broader household wellbeing.
- Structural Vulnerabilities and Risk Factors
3.1 Concentration Risk in AI and Semiconductors
Singapore’s outperformance is substantially dependent on a single technological supercycle. The AI semiconductor boom has driven extraordinary manufacturing output, but concentration in any single demand theme creates vulnerability. Should AI capital expenditure globally plateau or correct — as historical technology investment cycles have done — Singapore’s manufacturing sector would face disproportionate downside risk. Precision engineering, for instance, is already expected to face near-term challenges as semiconductor firms delay new capacity investment commitments amid US semiconductor tariff uncertainty.
3.2 US Tariff Exposure
Singapore’s open trade-dependent economy is structurally exposed to US trade policy shifts. The US-China trade truce, while currently extended to November 2026, remains fragile. The reciprocal tariffs implemented in August 2025 will have a full-year impact in 2026 compared to only five months in 2025, representing an incremental drag. The rollout of sectoral tariffs on semiconductors and pharmaceuticals — both critical to Singapore’s growth story — has been slower than initially feared but remains an overhang.
3.3 Domestic Demand Weakness
Singapore’s growth is structurally reliant on external demand. Consumer-facing domestic sectors — retail trade and F&B services — remain subdued. This reflects cost-of-living pressures that disproportionately affect lower-income households and smaller domestic businesses. The aggregate GDP growth figure therefore overstates the improvement in lived economic experience for a significant segment of the population.
Risk Summary
Three principal risk vectors face Singapore’s 2026 outlook: (1) a reversal or slowdown in global AI investment demand; (2) tariff escalation targeting Singapore’s key export sectors of semiconductors and pharmaceuticals; and (3) persistent domestic demand weakness that leaves growth narrowly concentrated in outward-oriented sectors.
- Economic Outlook for 2026
4.1 MTI Forecast
MTI upgraded its 2026 GDP growth forecast to 2.0–4.0%, up from the initial 1.0–3.0% projection, citing greater-than-expected resilience in the global economy, the extended US-China trade truce, and the ongoing AI investment boom. Most key sectors are expected to expand but at a moderated pace compared to 2025’s exceptional performance.
Sector 2026 Outlook Key Factors
Manufacturing (Electronics) Continued but moderated growth AI semiconductor demand persists; capacity investment uncertainty
Biomedical Manufacturing Easing from high 2025 base High-value API output normalisation
Finance & Insurance Steady growth Supportive financial conditions; resilient enterprise demand
Information & Communications Steady growth Digital transformation demand; AI infrastructure build-out
Construction Continued expansion Public housing, civil engineering works
Food & Beverage / Retail Subdued Weak domestic sentiment; tariff passthrough inflation risk
4.2 Monetary Policy Stance
The Monetary Authority of Singapore (MAS) maintained its S$NEER policy band at its January 2026 review — retaining the prevailing modest rate of appreciation with no change to the width or centre of the band. MAS projects core inflation to normalise to 1.0–2.0% in 2026, down from elevated levels in 2025. This measured stance reflects the dual objective of supporting growth while managing imported inflationary pressures from tariffs.
4.3 Global Context
Singapore’s 2026 growth path is intertwined with three global dynamics: the trajectory of the AI investment cycle, the durability of the US-China trade truce, and fiscal policy shifts in major economies. MTI notes that accelerated fiscal spending in Germany and the recently concluded India-EU trade deal could provide positive spillovers to Singapore as a regional entrepôt and financial centre.
- Policy Solutions and Recommendations
5.1 Diversify the Manufacturing Base
Singapore should accelerate efforts to broaden its manufacturing base beyond the AI semiconductor cycle. Priority areas include green energy technologies (solar, hydrogen, battery storage), advanced materials, and precision medicine manufacturing. The Economic Development Board (EDB) should target FDI from sectors that are less cyclically correlated with AI capex. This reduces the concentration risk that makes Singapore’s manufacturing output highly volatile relative to its economic size.
5.2 Deepen Trade Diversification
Reducing dependence on the US-China bilateral trade axis requires deepening Singapore’s FTA network and ASEAN integration. The India-EU deal and RCEP framework present opportunities. Specifically, Singapore should leverage its role as a financial and logistics hub to facilitate trade corridors between Southeast Asia and markets in the Middle East, India, and Africa — regions where US tariff policy has less direct impact.
5.3 Strengthen Domestic Demand Resilience
The persistent underperformance of domestically-oriented sectors requires targeted intervention. Policy options include: expanding the Workfare Income Supplement to broaden coverage for low-wage workers; deploying SkillsFuture credits to support upskilling in consumer services sectors; and using CDC Vouchers more aggressively to stimulate spending in F&B and retail during cyclical downturns. A structural solution involves encouraging productivity investment in F&B and retail through targeted tax incentives for technology adoption.
5.4 AI and Digital Economy Infrastructure
Singapore should continue to invest in data centre capacity and AI research infrastructure to sustain its competitive advantage in AI-related manufacturing and services. The National AI Strategy 2.0 provides a framework, but execution requires accelerated deployment of compute infrastructure, talent pipelines through universities, and international partnerships with AI research institutions. This ensures that Singapore captures not just hardware manufacturing value in the current AI cycle, but also higher-margin software and services value in subsequent cycles.
5.5 Fiscal Policy for Inclusive Growth
Given that growth is concentrated in outward-oriented sectors, the government’s Budget should be oriented toward redistributive mechanisms that channel productivity gains from manufacturing and financial services toward lower-income households and consumer-facing SMEs. This includes progressive enhancement of wage supplements, expanding social infrastructure spending, and using the Goods and Services Tax Voucher scheme as an automatic stabiliser during external demand downturns.
- Economic and Social Impact
6.1 Labour Market Impact
Strong GDP growth has supported employment, particularly in finance, manufacturing, and professional services. Labour productivity, as measured by real value-added per worker, grew 3.0% in Q2 2025. However, the benefits are not uniformly distributed. Sectors with persistent contraction — notably F&B services — employ a disproportionate share of lower-wage workers, creating a bifurcated labour market where aggregate employment statistics mask pockets of genuine economic hardship.
6.2 Inflation and Cost of Living
MAS projects core inflation to average 1.0–2.0% in 2026, providing some relief from the elevated cost-of-living pressures that constrained domestic consumption in 2025. However, tariff passthrough from US trade policy could introduce upward inflationary pressure, particularly for imported consumer goods. Housing costs remain structurally elevated relative to median income, an ongoing constraint on household discretionary spending.
6.3 Business and Investment Climate
Singapore’s strong GDP performance reinforces its status as Asia’s premier business hub. The sustained AI investment boom has attracted significant FDI into data centres and semiconductor-adjacent industries. The financial services sector benefits from Singapore’s position as a regional wealth management centre. However, businesses in domestically-oriented sectors face a difficult operating environment, characterised by elevated rents, tight labour markets, and subdued consumer demand.
6.4 Geopolitical and Trade System Impact
Singapore’s economic model — predicated on free trade, rule of law, and neutral engagement with all major powers — faces structural stress as US-China decoupling deepens. The extension of the US-China trade truce to November 2026 provides near-term relief, but the longer-term trajectory of great power competition poses existential questions about the viability of Singapore’s current economic positioning. Its response — maintaining diplomatic neutrality while actively diversifying trade relationships — is the appropriate strategic posture, but requires sustained political commitment and institutional dexterity.
- Conclusion
Singapore’s 2025 GDP growth of 5.0% represents a genuine economic achievement, driven by structural advantages in semiconductor manufacturing, biomedical production, and financial services that positioned it well for the AI investment supercycle. The economy has demonstrated resilience in the face of significant global headwinds including US tariff policy, US-China decoupling, and a prolonged American government shutdown that dragged on its largest trade partner.
However, the growth story carries important caveats. It is sectorally concentrated, domestically uneven, and dependent on a technology cycle that is by definition cyclical. The policy challenge for 2026 and beyond is to use the exceptional revenues and fiscal space generated by this growth to build a more diversified, inclusive, and domestically resilient economy — one that can sustain positive growth even when the AI semiconductor cycle inevitably moderates.
Bottom Line
Singapore’s GDP growth outperformance relative to the US and most developed economies in 2025 is real, but it is a tailwind-driven result as much as a structural one. Sustaining it requires deliberate policy action to broaden the base of growth, protect exposed sectors from geopolitical disruption, and ensure that aggregate prosperity translates more equitably into improvements in household living standards.
References
Ministry of Trade and Industry (MTI), Singapore. (2025). GDP Growth Estimates, Q1–Q4 2025. Singapore Government.
MTI. (2026, February). Upgrade of 2026 GDP Growth Forecast to 2.0–4.0%. Singapore Government.
Monetary Authority of Singapore (MAS). (2026, January). Monetary Policy Statement. Singapore.
Department of Statistics Singapore (DOS). (2025). Economic Survey of Singapore, Q2 2025.
Bureau of Economic Analysis (BEA). (2026, February 20). Gross Domestic Product, Fourth Quarter 2025 (Advance Estimate). US Department of Commerce.
Investopedia. (2026, February 20). GDP Report Live: Despite Growth Slowdown, ‘Core of the Economy is Resilient’. Taylor Tompkins.