2026 OUTLOOK

GDP growth for most of Singapore’s key trading partners is likely to be lower than that in 2025, as the impact of the US tariffs is expected to be more pronounced, said MTI.

“As tariffs hit, it takes time for the effects to feed into the rest of the (US) economy … as well as the exporting countries,” said Dr Beh Swan Gin, MTI’s permanent secretary.

Despite agreements between the US and some of its trading partners to lower tariffs, they will still be in place and that will have an effect, he said. 

The forecast for growth to be between 1 per cent and 3 per cent next year is not being “unduly pessimistic”, he added.

Chief economist Yong Yik Wei said that tariffs were “a bit on and off” this year, with a temporary pause.

“Next year, because it’s a full year worth of impact of the tariffs, and we do expect the front loading that took place this year to actually dissipate next year … we do expect the impact of the US tariffs to be more pronounced,” she said.

MTI said China’s GDP growth is forecast to moderate on the back of slower export growth and the boost provided by the consumer goods trade-in scheme fades.

“GDP growth in the Eurozone is also projected to slow as industrial activity weakens due to the US’ tariffs,” it added.

This slowdown in growth in major economies would moderate the demand for exports from Southeast Asia.

GDP growth among key Southeast Asian economies is expected to ease, although stable domestic demand “should provide some support”.

MTI expects the US economy to remain “relatively resilient”, supported by sustained AI-related investment even as domestic consumption growth moderates amid cooling labour market conditions.

On the downside, global economic uncertainty remains elevated and could increase further if tariff actions or geopolitical tensions escalate. 

That would weigh on sentiment and cause businesses and households to pull back on hiring, investment and spending.

An escalation in risk-off sentiments could trigger sharp corrections in global financial markets, with potential spillovers to broader economic growth.

Manufacturing and trade-related services sectors in Singapore are projected to expand at a slower pace next year.

Semiconductor equipment makers may face headwinds in the near term if firms take longer to commit to new capacity investments while waiting for greater certainty on US tariffs on the sector.

Mr Zavier Wong, market analyst at trading platform eToro, said Singapore is riding the upswing well, but policymakers seem wary of next year’s outlook.

“Businesses are still making decisions with one eye on what happens when the truce eventually expires, and that uncertainty naturally caps how confident policymakers can be about the year ahead,” he said.