Singapore’s Market Outlook 2025: Five Key Economic Themes to Watch

Singapore's economy is poised to remain dynamic in 2025, navigating through challenges such as geopolitical tensions and economic uncertainties while capitalising on favourable global trends. The following are five key themes shaping Singapore’s economic outlook for the year.

1. Favourable Growth Prospects

Singapore is set to achieve a projected economic growth rate of 2.8% in 2025, in line with our estimated medium-term growth potential of 2-3%. Our forecast is underpinned by resilient external demand, at least in early 2025, driven by sectors like electronics, trade-related services, finance, and information and communications technology (ICT).

The manufacturing sector, particularly electronics, continues to be key for growth. Singapore’s strategic role in the global semiconductor supply chain positions it to benefit from rising demand for artificial intelligence (AI) technologies and consumer electronics. Global semiconductor sales are expected to grow by 11.2% in 2025, which support Singapore’s electronics output and exports.

Modern services such as ICT and finance will also be important growth engines. Demand for tech services is likely to be supported by ongoing digitalisation spending by firms as they increasingly adopt emerging solutions, such as generative AI. The financial services sector is poised to benefit from expected cuts in global interest rates that fuel investment activity.

However, this outlook faces significant downside risks, particularly the potential escalation of geopolitical and trade tensions. Such developments could disrupt global supply chains, increase costs, and pose challenges for Singapore’s highly interconnected and trade-dependent economy.

2. Johor-Singapore Special Economic Zone: A New Frontier

The Johor-Singapore Special Economic Zone (JS-SEZ) represents a significant opportunity to deepen regional collaboration and economic integration. Covering a vast 3,571 square kilometres in southern Johor, the JS-SEZ promises to combine Singapore’s strengths as a business and financial hub with Johor’s abundant land, labour, and energy resources.

Industries such as data centres, electronics, renewable energy, and tourism stand to benefit from this collaboration. Improved connectivity, particularly through the Johor Bahru-Singapore Rapid Transit System (RTS) Link, which is expected to complete by end-2026, will facilitate smoother movement of goods and people, further bolstering trade and investment.

However, successful implementation will depend on resolving various challenges, including manpower, cross-border movement, and ease of doing business. Both governments are committed to tackling these issues. 2025 is expected to mark a pivotal year for the JS-SEZ’s development, following the exchange of the JS-SEZ Agreement during the 11th Malaysia-Singapore Leaders’ Retreat on January 6-7, 2025.

3. Inflation to Ease to Pre-Pandemic Rates

Singapore’s inflation is likely to moderate further, with our forecasts for headline and core inflation averaging at 1.7% and 1.5% in 2025, respectively, from 2.4% and 2.7% in 2024. These align with the Monetary Authority of Singapore’s (MAS) medium-term price stability objective.

The easing inflationary pressures stem from several factors, including contained imported inflation, reduced domestic business cost pass-through to consumer prices, and the fading impact of previous goods and services tax (GST) hikes. Rental accommodation cost increases, which have been a key driver of inflation, are expected to normalise as supply constraints ease.

Global commodity prices, particularly for energy and food, are anticipated to remain contained, providing continued relief. As such, Singapore’s imported costs are expected to remain manageable in the coming months amid contained global prices, which are also likely to be tempered by gradual Singapore dollar (SGD) appreciation. 

4. Fiscal Policy Balancing Long-Term Goals and Immediate Needs

The Singapore government’s fiscal strategy will aim to balance long-term initiatives under the Forward Singapore agenda with immediate concerns such as the high cost of living. Forward Singapore, launched to refresh Singapore’s social compact, will see continued investments in housing, healthcare, and workforce transformation.

Despite global uncertainties, Singapore’s better-than-expected fiscal position—bolstered by an estimated cumulative overall surplus of SGD1.8 billion from FY2021 to FY2024—provides room for additional support in 2025. This includes targeted support for households and businesses to address near-term economic pressures, with the country gearing up for its next general elections that are due by November 2025.

5. SGD NEER Policy Easing

The MAS is expected to maintain a vigilant approach to its exchange rate policy, and the next easing might be in the second half of 2025, after loosening during its January 2025 review. The central bank slightly reduced the appreciation pace of the SGD nominal effective exchange rate (NEER) policy band during its January 2025 review. The MAS forecasts core inflation to decline to 1.0–2.0% in 2025, from 2.7% in 2024, providing room for policy adjustment. Concurrently, growth uncertainties have risen due to possible shifts in global trade policies.

The SGD’s modest and gradual appreciation policy stance, coupled with Singapore’s robust economic fundamentals, ensures it remains a resilient currency amidst global volatility. The MAS will closely monitor external factors, including US policies and global economic developments, which could influence its policy decisions.

Challenges and Risks

Singapore’s economic outlook remains positive, but potential risks loom. Geopolitical tensions, particularly escalating global trade conflicts, could disrupt global supply chains and dampen demand. Furthermore, any unexpected significant weakness in major economies like China could spill over negatively on Singapore’s trade-dependent economy.

Nonetheless, Singapore’s strong fundamentals and proactive policy responses provide cushion to navigate these challenges in 2025 and beyond.

The article is contributed by Chua Han Teng, Economist, DBS Bank Ltd