Singapore’s 4Q25 GDP was revised higher, lifting full-year 2025 growth to 5.0%. UOB upgraded its 2026 GDP forecast to 3.6% from 2.6%, and the Ministry of Trade and Industry raised its 2026 forecast range.
MTI’s Composite Leading Index rose in 4Q25 to 3.7% quarter-on-quarter, from 3.2% in 3Q. This points to stronger seasonally adjusted quarter-on-quarter GDP growth in 1Q26.
Outlook For 2026 Growth
UOB’s baseline assumes robust seasonally adjusted quarter-on-quarter growth in 1Q26, weaker in 2Q26, and very soft increases in 3Q–4Q26. Under this baseline, the output gap is projected to remain positive in 2026 at 1.0%, compared with 1.2% in 2025.
A positive output gap supports expectations of a one-off Monetary Authority of Singapore move in April 2026. The scenario described is a 50 bps steepening of the S$NEER policy band slope to 1.0% per year, aimed at bringing the S$REER closer to equilibrium rather than starting a series of tightening steps.
We are seeing Singapore’s economy perform significantly better than previously thought, following a major upward revision to the fourth-quarter 2025 GDP figures. This revision boosted the full-year growth for 2025 to a strong 5.0%. As a result, we have upgraded our 2026 growth forecast to 3.6%, recognizing the powerful momentum carrying into this year.
This positive outlook is supported by the latest data coming in for early 2026. For instance, January’s manufacturing PMI registered a solid 50.8, marking the fifth consecutive month of expansion and signaling robust factory activity. Furthermore, non-oil domestic exports (NODX) in January grew 4.5% year-on-year, handily beating expectations and showing sustained external demand.
Implications For Mas Policy
The strength of the economy, reflected in a positive output gap, points directly toward a policy response from the Monetary Authority of Singapore (MAS). With core inflation in January ticking up to 3.3%, the pressure on the central bank to act is building. We therefore expect the MAS to tighten its monetary policy at the upcoming April meeting.
The most likely action will be a steepening of the S$NEER policy band’s slope, effectively allowing the Singapore dollar to appreciate at a faster rate against its trading partners. Historically, we have seen the SGD strengthen in the weeks leading up to such pre-announced tightening moves, as was the case during the policy shifts back in 2022. This suggests a window of opportunity is now open.
For traders, this creates a clear directional bias in the weeks ahead. Positioning for a stronger Singapore dollar through derivative instruments like call options on the SGD against the USD seems prudent. Given the widespread expectation of a move, implied volatility may also rise, potentially benefiting long-option strategies.
However, we view this as a probable one-off adjustment to guide the currency back towards its fundamental equilibrium, not the beginning of a prolonged tightening cycle. Therefore, derivative strategies should likely be timed with expirations around or shortly after the April policy decision. This would capture the anticipated run-up in the currency while managing risk against the possibility that the MAS signals a pause thereafter.
