- Accommodative financial conditions and policy measures would support capital market activities.
- AI-related investment and policy measures should begin to bear fruit.
- Strong private banking and FDI flows are likely to continue.
- The Johor-Singapore Special Economic Zone would continue to catalyse investments.
- A multi-year domestic construction boom will keep the sector humming.
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Commentary: A constructive case for Singapore in 2026
Singapore ended 2025 with supercharged manufacturing growth outpacing services and construction expansion. Manufacturing growth soared by 7.6% in 2025 from 4.3% in 2024, while ‘wholesale & retail trade and transportation & storage’ activity rose by 4.5% in 2025, extending the 5.0% increase in 2024.
The US tariff tsunami turned out to be staggered and proved to be less burdensome than initially feared. Exports were also lifted by the unrelenting AI-related boom, which pushed up demand for electronics.
It is unlikely that another year of nearly-5% GDP growth will be replicated in 2026, given the myriad of geoeconomic uncertainties. We however see a few mitigating factors that will keep economic activities healthy.
First, accommodative financial conditions from low domestic interest rates. Inflation related concerns are few, while liquidity is ample, fuelled by strong capital flows. These factors should keep lending and borrowing risks in check, supporting capital market activities.
Second, trading activity would be partly aided by the authorities’ equity market reforms. On the back of several measures that energised the markets in 2025, late year announcements created further impetus for 2026. These include a dual listing bridge between Singapore Stock Exchange (SGX) and Nasdaq, appointment of the second batch of asset managers under the SGD5bn equity market development programme, and several structural reforms to enhance trading and market structure.
Third, AI-related investment and policy measures. Singapore’s public and private sector are ramping up AI-related spending and initiatives. Efforts to upskill the workforce are progressing, while AI adoption is being hastened by data and tech infrastructure buildup. There is strong expectation that tech services will become more seamless in the coming years as AI integration materialises.
Fourth, continued interest in Singapore’s trusted business hub. Recent years have seen record private banking and FDI flows to Singapore, a testament to its reputation of stability. We expect that trend to persist.
Fifth, regional initiatives, including further progress with the Johor-Singapore Special Economic Zone. Billions of dollars are being invested by Singaporean firms to take advantage of the synergy between the two areas, ranging from land to talent, tech to tourism, and housing to trade. A construction boom, already evident around the Rapid Transit System Link that is nearing completion, would sustain through 2026 and beyond.
Sixth, domestic construction sector, where a multi-year boom already underway. We expect building activity to be lifted by mega projects such as Changi Airport Terminal 5, Tuas Port, North-South Corridor, Marina Bay Sands, and Resorts World Sentosa, along with substantial housing rollout, both public and private.
There will be no shortage of concerns about the outlook, given the external worries driven by a highly assertive US. Still, it is heartening to recognise that the island city has a few concrete levers of support in place to sustain prosperity.
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