Singapore's Unexpected Growth in 2025 Faces Sustainability Test
Singapore, Thursday, 1 January 2026.
Singapore’s economy grew by 4.8% in 2025, exceeding forecasts, driven by AI demand. Prime Minister Wong cautions that maintaining this growth will be tough, urging a refresh of economic strategies.
Economic Performance in 2025
Singapore’s economy showcased resilience in 2025, achieving a growth rate of 4.8% [1][2][3]. This figure surpasses the 4.4% growth recorded in 2024 and exceeds forecasts from private sector economists, who predicted 4.1%, as well as the Monetary Authority of Singapore (MAS) forecast of around 4% [1]. Prime Minister Lawrence Wong acknowledged this better-than-expected outcome in his New Year’s message on Wednesday, December 31, 2025 [1][2].
Factors Driving Growth
The robust growth in 2025 can be attributed to several factors. A more resilient global economic landscape and the surge in demand for semiconductors and electronics, spurred by the artificial intelligence (AI) boom, played significant roles [1]. Additionally, the United States imposing tariffs later and at lower levels than initially anticipated provided a favorable environment [1]. Many companies, including Microsoft and various startups, are increasingly viewing Singapore as a dependable hub amidst global uncertainties [1].
Challenges to Sustainability
Despite the positive economic results, Prime Minister Wong has expressed concerns about sustaining this growth momentum [2]. He emphasized the need for Singapore to “rethink, reset, and refresh” its economic strategies to maintain competitiveness [1][3]. Wong cautioned that Singapore, as a small and open economy, cannot be entirely shielded from global headwinds and anticipates facing more obstacles to growth, potentially intensifying inflationary pressures [3].
Government’s Strategic Response
The government is actively formulating strategies to address these challenges. Proposals from the Economic Strategy Review, led by Minister for Trade and Industry Gan Kim Yong, will be considered during Budget 2026 [1]. Prime Minister Wong is scheduled to deliver the Budget 2026 speech in Parliament on February 12, 2026 [3]. These strategic initiatives aim to secure a reliable supply of clean energy for energy-intensive industries like AI, including importing green energy and exploring low-carbon hydrogen and nuclear energy [1].
Focus on Clean Energy
Singapore is committed to securing a dependable supply of clean energy for sectors heavily reliant on energy, such as AI [1]. Plans include importing green energy and actively contributing to the development of an ASEAN Power Grid [1]. Furthermore, the nation is exploring clean energy alternatives, such as low-carbon hydrogen and nuclear energy, to diversify its energy sources [1]. Prime Minister Wong drew parallels between Singapore’s historical water scarcity challenges and the current pursuit of clean energy, stating, “Just as we did with water, we must turn this vulnerability into a source of strength” [1].
Looking Ahead
As Singapore commemorates 60 years of independence in 2025, Senior Minister Lee Hsien Loong hopes Singaporeans will remain united and continue building a prosperous and resilient nation in 2026 and beyond [3]. The Prime Minister’s New Year message served as a reminder of the tasks ahead: managing global uncertainties and improving the lives of Singaporeans [3]. The nation aims to harness its diverse perspectives to chart a new path forward as a united people, addressing complex challenges with boldness and creativity [1].