Singapore: Growth upgrade supports MAS stance – UOB

UOB’s Jester Koh notes that Singapore’s 4Q25 GDP was revised sharply higher, lifting full-year 2025 growth to 5.0% and prompting an upgrade of the bank’s 2026 GDP forecast to 3.6%. The Ministry of Trade and Industry also raised its 2026 forecast range, while a still-positive output gap underpins expectations for a one-off Nominal Effective Exchange Rate Index (S$NEER) slope steepening in April 2026.

Growth upgrade and policy implications

"Outlook – We are raising our 2026 GDP growth forecast for Singapore to 3.6% from 2.6% previously, with risks likely still tilted towards the upside after the sharp revision."

"Furthermore, MTI’s Composite Leading Index (CLI) for Singapore strengthened further in 4Q25 (3.7% q/q; 3Q: 3.2%), signalling a possibly even stronger q/q sa GDP expansion in 1Q26."

"Our growth projections remain somewhat conservative, assuming a robust q/q sa expansion in 1Q26 (albeit softer than 4Q25), a technical pullback in 2Q26, followed by very soft q/q sa increases in the 3Q–4Q26 quarters."

"Under our revised baseline projections, we assess that the output gap is likely to remain significantly positive in 2026 (1.0%, 2025: 1.2%), broadly comparable to MAS’ estimate in the Jan 2026 Macroeconomic Review, reinforcing our base case for a 50bps S$NEER band slope steepening to 1.0% p.a. in the next Apr 2026 MPS (See Jan 2026 MPS note)."

"We view this as a likely one-off adjustment to align the S$REER closer to equilibrium levels, rather than the start to a sequence of tightening moves, for now."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)