In 2026, Singapore is slated to encounter a crucial year in which its economic resilience will be put to the test by changing geopolitical scenarios, trade fragmentation, and a moderating technology cycle, according to a recent report by DBS, the nation’s leading bank.
DBS Group Research predicts a GDP growth of 1.8 percent, which, while proximate to potential, is down from an estimated 4.0 percent in 2025. The city-state will be managing the dual challenges of tariffs and tech, often referred to as the “two Ts” by analysts.
It is projected that export-dependent sectors will experience a slowdown due to the ongoing impact of increased global tariffs and potential new semiconductor charges that could be imposed by the US. The World Trade Organization anticipates world merchandise trade volume to grow by a mere 0.5 percent in 2026, a sharp decrease from over 2 percent in the previous two years. This suggests a waning external demand.
Singapore’s electronics strength, fuelled by AI-related components, has now reached a mature phase, following an 18-month growth period. Global semiconductor sales growth is expected to slow down to 9.9 percent in 2026, from 15.4 percent in 2025. This could potentially curb manufacturing momentum if the AI boom subsides or if proposed US chip tariffs come into effect.
In contrast, the services economy, particularly finance and insurance, information and communications, and professional services sectors, is anticipated to balance overall performance. Over the past decade, these modern services have demonstrated stronger and more consistent growth compared to manufacturing. This has been facilitated by digitisation, favourable financial conditions, and robust regional investment flows.
Major infrastructure projects, such as Changi Airport Terminal 5, Tuas Port, and the North-South Corridor, are expected to stimulate the domestic construction sector. This sector is forecasted to generate an annual demand of S$39-46 billion from 2026 to 2029, indicating a structurally stronger outlook than both the post-pandemic recovery and the pre-COVID times.
Headline and core inflation are predicted to average 1.2 percent and 1.0 percent, respectively, in 2026. This inflation rate is higher than the post-pandemic low in 2025, but still falls within the Monetary Authority of Singapore’s target range. Imported disinflation is diminishing, while domestic costs will modestly increase as productivity trails behind wage growth.
Changes in green policies, such as a planned 1.8 fold carbon tax increase and a sustainable fuel levy for aviation, are forecasted to drive up utility and travel prices. It is estimated that the carbon tax adjustment could increase electricity tariffs by approximately four percent in 2026. However, inflation of essential services is expected to be controlled by healthcare subsidies and reduced education fees.
With a refreshed political leadership, Singapore is preparing to launch an updated strategy to boost competitiveness and ensure long-term vibrancy. This will include technology adoption, attracting global investments, and strengthening roles in emerging sectors like low-carbon energy and data flows.
Singapore’s status as a trusted hub, coupled with government buffers and policy continuity, forms the foundation of what DBS refers to as “measured resilience”. This refers to a type of growth that withstands challenges while also preparing for the next stage of economic transformation.
What are the “two Ts” that Singapore is expected to navigate in 2026?
The “two Ts” refer to tariffs and technology. These are the two major challenges that are anticipated to impact Singapore’s economic growth in 2026.
How is Singapore’s services economy expected to perform in comparison to the manufacturing sector?
The services economy, particularly sectors like finance and insurance, information and communications, and professional services, is expected to balance overall performance in 2026. These sectors have shown stronger and more stable growth than manufacturing over the past decade.
What is the predicted impact of green policy changes on Singapore’s economy in 2026?
Changes in green policies, including a planned increase in carbon tax and a sustainable fuel levy for aviation, are expected to drive up utility and travel prices. However, inflation of essential services should be kept in check due to healthcare subsidies and reduced education fees.
