Singapore warns of slower 2026 growth after third-quarter GDP beats expectations
This stunning aerial view captured from a commercial flight showcases cargo ships lined up along the strait in Singapore on April 7, 2025.
Photo by Mohd Rasfan | Afp | Getty Images
In a positive turn of events, Singapore’s economy outperformed expectations in the third quarter, despite warnings from the country’s central bank about a potential slowdown in 2026.
The Ministry of Trade and Industry reported a 2.9% year-on-year increase in Gross Domestic Product for the three months ending in September, surpassing economists’ predictions of a 1.9% growth. However, this marked a deceleration from the revised 4.5% expansion seen in the previous quarter.
On a seasonally adjusted, quarter-on-quarter basis, the economy saw a 1.3% expansion, slightly lower than the 1.5% growth in the preceding quarter.
The manufacturing sector was a major factor contributing to the slowdown, remaining stagnant after a 5% surge in the second quarter. Additionally, the construction industry softened, recording a 3.1% year-on-year growth compared to 6.2% in the previous quarter.
“The decline in growth can be attributed to decreases in output within the biomedical manufacturing and general manufacturing clusters, despite growth in other manufacturing sectors,” stated the Ministry of Trade and Industry.
Service sector growth also decelerated to 0.2% from 1.7%, primarily due to contractions in wholesale and retail trade, as well as transportation and storage.
Meanwhile, the Monetary Authority of Singapore decided to keep its policy settings unchanged, maintaining its stance from July. The central bank anticipates a moderation in GDP growth as trade-related sectors return to normal levels of activity.
Looking ahead, Singapore’s manufacturing sector is expected to benefit from global investments in artificial intelligence, while construction and financial services are likely to thrive due to infrastructure spending and favorable financial conditions.
“For 2026, GDP growth is forecasted to slow in alignment with external developments, approaching a near-trend pace to narrow the output gap to around 0%,” the MAS stated.
In August, Singapore experienced an 11.3% decline in non-oil domestic exports, marking the sharpest drop since March 2024. Exports to Indonesia, the U.S., and China decreased, while exports to the European Union, Taiwan, and South Korea saw an increase.
Furthermore, Singapore’s exports to the United States plummeted by 28.8% year on year in August, following a 42.8% decline in July.
On a separate note, the MAS projected a decrease in core inflation in the near term, followed by a gradual increase. Core inflation is expected to average around 0.5% for 2025 and fall between 0.5% and 1.5% in 2026.
Core inflation in August rose by 0.3%, marking the slowest pace since February 2021, with a decline in services costs being a contributing factor.
