DBS Group Research has lifted its medium-term outlook for Singapore after assessing the economy’s performance through the first half of 2026 and the impact of renewed geopolitical shocks linked to the Middle East conflict. The bank now forecasts real GDP growth of 4.3% in 2026 and 3.0% in 2027, up from 2.8% and 2.3%, and attributes the firmer profile to strong first-half momentum and continued support from AI-related activity, financial services and construction.
The revised view also factors in a reduction in stagflationary risks following US-Iran de-escalation under an interim peace deal, which is expected to ease the probability of escalating input cost pressures, persistent severe supply chain disruptions and weaker external demand. DBS expects carryover into 2H26 but flags that high base effects may temper growth over the next few quarters. The article was produced using an Artificial Intelligence tool and reviewed by an editor.
Opportunities In Singapore-Linked Assets
With the upgraded 2026 real GDP growth forecast of 4.3%, we see clear opportunities in Singapore-linked assets. The economy’s resilience and the de-escalation of Mideast tensions reduce downside risks, making bullish positions more attractive. We should act on this positive outlook in the coming weeks.
We believe long positions on the Straits Times Index (STI) are warranted. Buying call options or index futures on the STI offers direct exposure to the expected economic strength, particularly in the financial and industrial sectors. For instance, the Singapore Exchange (SGX) reported a 12% year-on-year increase in derivatives volume for May 2026, showing already heightened market activity.
Singapore Dollar And Policy Implications
The Singapore Dollar is also poised for further strength. A robust economy gives the Monetary Authority of Singapore (MAS) room to maintain its policy of gradual currency appreciation to curb inflation. Historically, strong GDP figures like these have supported the MAS’s hawkish stance, as seen in their 2022-2023 tightening cycle.
Therefore, we should consider going long on the SGD against currencies with weaker economic outlooks. Using currency options or futures can be an effective way to speculate on the SGD’s appreciation ahead of the next MAS policy meeting in October. The latest inflation print for May 2026, which held steady at 2.9% year-on-year, reinforces the view that the MAS will not be easing policy soon.
While the outlook is strong, the forecast of high base effects suggests this accelerated growth may moderate later. We should therefore structure trades with expirations in the third and fourth quarters of 2026 to capture the immediate momentum. This allows us to capitalize on the positive carryover effects from the first half of the year.
