Singapore’s 4Q25 GDP was revised up. This lifted full-year 2025 growth to 5.0%. UOB raised its 2026 GDP forecast to 3.6% from 2.6%. The Ministry of Trade and Industry (MTI) also increased its 2026 forecast range.
MTI’s Composite Leading Index rose in 4Q25 to 3.7% quarter-on-quarter, up from 3.2% in 3Q. This suggests stronger seasonally adjusted quarter-on-quarter GDP growth in 1Q26.
Outlook For 2026 Growth
UOB’s baseline expects strong seasonally adjusted quarter-on-quarter growth in 1Q26, weaker growth in 2Q26, and only very small gains in 3Q–4Q26. Under this baseline, the output gap is expected to stay positive in 2026 at 1.0%, slightly lower than 1.2% in 2025.
A positive output gap supports the view that the Monetary Authority of Singapore could make a one-off move in April 2026. The expected move is a 50 bps steepening of the S$NEER policy band slope to 1.0% per year. The goal would be to bring the S$REER closer to its equilibrium level, not to start a long series of tightening steps.
Singapore’s economy is doing much better than earlier estimates suggested. The large upward revision to 4Q25 GDP lifted full-year 2025 growth to a strong 5.0%. In response, we raised our 2026 growth forecast to 3.6%, reflecting solid momentum going into the year.
Recent data for early 2026 supports this view. January’s manufacturing PMI came in at 50.8, the fifth straight month of expansion, which points to steady factory activity. January non-oil domestic exports (NODX) rose 4.5% year-on-year, beating expectations and showing that external demand remains firm.
Implications For Mas Policy
Economic strength, shown by a positive output gap, increases the chance of a Monetary Authority of Singapore (MAS) policy response. Core inflation also edged up in January to 3.3%, adding to the pressure to act. We therefore expect MAS to tighten policy at its April meeting.
The most likely step is to steepen the slope of the S$NEER policy band. This would allow the Singapore dollar to appreciate faster against its trading partners. In past cycles, the SGD often strengthened in the weeks before pre-announced tightening moves, including in 2022. This suggests there may be an opportunity ahead of the April decision.
For traders, this points to a bias toward a stronger SGD in the coming weeks. One approach is to position for SGD strength using derivatives, such as SGD call options against the USD. Because many expect a policy move, implied volatility could rise as well, which may support long-option strategies.
That said, we see this as a likely one-off adjustment to guide the currency closer to fundamental value, not the start of a long tightening cycle. As a result, option strategies may be best timed with expiries around, or shortly after, the April policy decision. This could capture the expected pre-meeting move while limiting exposure if MAS signals a pause afterward.
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