World's second richest country posts 5.4% GDP growth in Q3, beating estimates

Singapore's economy experienced a robust 5.4% quarter-on-quarter growth in the third quarter, surpassing market expectations. This growth outpaced the 1.1% increase from the previous quarter and the 5% rate economists anticipated. The manufacturing sector saw a slight slowdown in expansion to 7.5% year-on-year, down from the previous 12.9% surge.

Conversely, the construction industry expanded by 8.8%, up from the 6.1% growth in the prior quarter, driven by increased output from both the public and private sectors. The services sector maintained a steady 5.2% year-on-year growth, bolstered by wholesale trade and transportation and storage. Notably, wholesale & retail trade and transportation & storage grew by 8% year-on-year, up from 6.9% in the previous quarter, with all sectors expanding except retail trade.

Selena Ling, OCBC's chief economist, highlighted that Singapore's growth is propelled by AI and electronics-related activities, trade and transport services, as well as construction and infrastructure. However, she noted that finance, information and communications, and professional services continued to exhibit healthy growth, while consumer-oriented industries and other domestically focused services underperformed.

The city-state's third-quarter GDP growth rate of 5.4% exceeded the 5% forecast by Reuters surveyed economists and the 5.1% consensus estimate from a Bloomberg poll. Singapore's 2026 GDP growth forecast stands at 4.5-5.5%, more than double its previous outlook of 2-4%, signaling a significant upgrade in growth expectations. This performance has prompted some analysts to raise their full-year economic growth projections for Singapore.

Yun Liu, HSBC's senior ASEAN economist, raised the forecast to 5.8% from 5.1%, potentially making Singapore the second-fastest-growing economy in Southeast Asia, behind Vietnam. Sheana Yue, Oxford Economics' senior economist, anticipates Singapore's GDP growth to beat earlier estimates, possibly approaching 6%. She attributed this potential growth to the ongoing influence of AI, though she cautioned that it could also become a key risk in 2027 if a premature pullback were to occur.

Meanwhile, the Monetary Authority of Singapore decided to maintain its monetary policy unchanged, despite two consecutive rounds of tightening, a decision that surprised analysts. The central bank anticipates that inflation will remain elevated in the near term due to rising energy and food costs before easing from mid-2027 as import costs decline and domestic price pressures stay subdued.

The Singapore economy is expected to continue expanding at a firm pace in the immediate quarters and moderate thereafter as the AI cycle eases from its exceptional pace and global financial conditions tighten.