Post by : Saif Rahman

Economists are showing increased optimism regarding Singapore’s economic performance for 2025, as indicated by a recent survey from the Monetary Authority of Singapore (MAS). Favorable economic indicators have prompted experts to elevate their expectations for the upcoming year. Nonetheless, they caution that this boost in growth may face challenges in 2026 due to rising global risks.

The MAS survey, conducted during the December quarter and gathering insights from 20 economists, documents a median growth forecast for Singapore in 2025, now projected at 4.1%. This marks a significant increase from the 2.4% prediction noted in the prior survey. The improved outlook follows a period of unexpectedly robust economic activity.

In the third quarter, Singapore's economy expanded by 4.2% year-on-year, surpassing initial expectations and market predictions, which has bolstered economist confidence. Additionally, in November, Singapore’s trade ministry upgraded its official growth estimate for 2025 to approximately 4.0%, reinforcing the positive trend.

As attention shifts to 2026, economists foresee a deceleration in growth, predicting it will taper off to about 2.3%. This emerging concern stems from potential dips in global demand and an anticipated waning of current growth drivers, particularly in trade and technology.

The survey also identifies several risks pertinent to Singapore’s economy. Foremost among them, increasing geopolitical tensions have emerged as a primary downside threat. Given Singapore's nature as a small and open economy, it is particularly vulnerable to global conflicts, trade tensions, and supply chain disruptions.

In addition, economists have raised a new concern regarding a potential artificial intelligence bubble. Approximately four out of ten surveyed economists flagged this issue, marking a departure from earlier discussions. While AI has spurred substantial investment in the tech sector, a sudden dip in investor confidence could adversely impact growth.

Positively, the ongoing AI-driven technology boom and consistent global growth could further bolster Singapore’s economy. Should global demand hold steady, Singapore may reap benefits in trade, investment, and innovation.

On monetary policy, economists anticipate a period of stability. All survey participants expect the MAS to maintain its current policy at the upcoming January review, with most projecting no changes in April as well. Only a minority, around 11%, foresee a tightening of policies by July 2026.

Inflation is projected to stay low in the short term. The survey indicates that forecasts for both core inflation and headline inflation in 2025 remain steady at 0.7% and 0.9%, respectively. However, a slight uptick is expected for 2026, with core inflation estimated at 1.3% and headline inflation at 1.5%.

These predictions align with the MAS's earlier guidance. In October, the central bank estimated that core inflation would average around 0.5% in 2025, while headline inflation was expected to range between 0.5% and 1.0%.

In conclusion, the survey portrays a landscape of cautious optimism. Singapore appears poised for a strong 2025 supported by robust growth and stable policies. Nonetheless, economists emphasize the importance of remaining vigilant regarding global risks and future challenges to secure long-term economic stability.

#Global News