This aerial photo taken from a commercial aircraft shows a cargo ship moored along the Strait in Singapore on April 7, 2025.
Mohd Rasfan | AFP | Getty Images
Singapore’s economy expanded faster than expected in the third quarter, despite the country’s central bank warning that growth was likely to slow in 2026.
The Department of Trade and Industry said on Tuesday that gross domestic product rose 2.9% year-on-year in the three months to September.
That was above economists’ expectations for a 1.9% increase, but slower than the revised 4.5% increase in the second quarter.
On a seasonally adjusted quarter-on-quarter basis, the economic growth rate was 1.3%, slightly slower than the previous quarter’s 1.5%.
Manufacturing was the main drag on growth, flattening after expanding 5% in the second quarter. The construction sector also softened, increasing by 3.1% year-on-year (up 6.2% in the previous quarter).
“Growth was weighed down by lower output in the biopharmaceutical manufacturing and general manufacturing clusters, despite the expansion in output in other manufacturing clusters,” MTI said in a statement.
Growth in the services sector slowed from 1.7% to 0.2%, dragged down by contractions in wholesale, retail, and transportation and storage.
“This is slower than the 4.5% year-on-year rate in the second quarter, due in part to a strong base effect a year ago, but still reflects a resilient pace of growth amid global trade headwinds,” Lloyd Chan, senior currency analyst at Mitsubishi UFJ Financial Group, said in a note after the data was released.
MAS determination
The reason behind the economic slowdown is that the Central Bank of Singapore did not change its policy settings and maintained its stance from July.
The Monetary Authority of Singapore said GDP growth is expected to moderate as activity in trade-related sectors “normalizes”.
The central bank said global investment in artificial intelligence is expected to support Singapore’s manufacturing sector, while construction and financial services should benefit from infrastructure spending and accommodative financial conditions.
“The GDP growth rate in 2026 is expected to slow to a near-trend pace in line with external conditions, and the output gap is expected to narrow to around 0%,” MAS said in a statement.
Vishnu Varasan, managing director at Mizuho Securities, said he was “not surprised” by MAS’s decision, even though headline and core inflation had fallen significantly in the run-up to the decision.
Core inflation rose 0.3% in August, the slowest pace since February 2021, as service costs eased.
Separately, MAS said it expects core inflation, which deducts prices for private transport and accommodation, to ease in the short term and then rise gradually.
The central bank said core inflation should average around 0.5% in 2025 and 0.5-1.5% in 2026.
Barasan said the MAS decision was a “comfortable hold” rather than a “dovish moratorium”, adding that the bar for further easing remains much higher than mere disinflationary risks.
“Flattening of the slope[of the Singapore dollar nominal effective exchange rate]…will require an adverse demand shock,” he said.
Exports from Singapore in August recorded an 11.3% decline in non-oil domestic exports, the sharpest decline since March 2024.
Non-oil exports to Indonesia, the United States and China fell in August, while exports to the European Union, Taiwan and South Korea rose, according to government data.
Singapore’s exports to the US decreased by 28.8% year-on-year in August, following a 42.8% decline in July.
