Singapore Country Risk Report

Singapore has a remarkable track record of economic growth, with an annual average rate of +5.4% in the 2000s and +5% in the 2010s. The economy was severely hit by the Covid-19 crisis, with growth contracting by -3.8% in 2020, followed by a strong rebound of +9.8% in 2021 and moderating to +4.1% in 2022. Softening external demand amid high inflation and a downturn in the electronics cycle then led to a slowdown to +1.8% in 2023. Growth then improved in 2024 (+4.4%), thanks to a rebound in global demand and domestic private consumption. Going forward, we forecast growth to settle at +1.6% in 2025 and +1.8% in 2026 in the context of global trade being hit by more protectionist US trade policies. This will affect Singapore’s exports and trade-related services, with a reverberating impact on domestic consumption and investment. In the medium term, and beyond the initial shock from the US trade war, risks to Singapore’s economic growth are tilted to the downside, including a global economic slowdown, supply-chain disruptions and rising geopolitical tensions. In the longer term, risks from climate change may weigh on economic prospects.

Fiscal policy in Singapore was supportive during the Covid-19 crisis and pushed the fiscal balance into a deficit of -6.7% of GDP in 2020 – a significant deviation from the pre-pandemic average of +5% of GDP surplus. The economic recovery and the rollback of broad-based supportive measures have brought the fiscal balance back into positive territory since, with a surplus of +1.1% of GDP in 2021, +1.2% in 2022, +3.5% in 2023 and +4.5% in 2024. We expect the fiscal balance to stabilize at around 3% in 2025 and 2026, while targeted policies will continue to be rolled out, such as measures for the labor market or support for technology sectors. Medium- and long-term challenges such as an ageing population, risks from climate change and the need to maintain its competitiveness among rising competition from regional peers will constrain the surplus from increasing further.

In terms of prices, after reaching highs in 2022-2023, headline inflation is likely to ease: we expect 0.9% in 2025 and 1.2% in 2026 (below the pre-pandemic average of +1.7% across 2010-2019). Inflation will remain subdued in the context of low commodity prices, a strong Singapore dollar and soft domestic demand. During the monetary policy tightening cycle across 2021-2023, the Monetary Authority of Singapore (MAS) increased the slope of the S$NEER policy band four times and took up the center three times. This policy stance has been helpful in dampening inflation, with inflation expectations remaining well-anchored. The MAS policy stance pivoted in 2025, reducing the slope of the S$NEER policy band twice in the first half of the year. Further easing action is likely this year.

Singapore offers a prime business environment for corporations, thanks to its liberal landscape in terms of trade and investments, transparent political system, favorable tax policies, solid infrastructure and a strong workforce. The World Bank Institute’s annual Worldwide Governance indicators suggest that the regulatory and legal frameworks are business-friendly, and the level of corruption is low. On broadly similar lines, the Heritage Foundation’s annual Index of Economic Freedom Survey 2024 ranks Singapore 2nd out of 185 countries, reflecting strengths in areas such as trade freedom, property rights, government integrity, tax burden, government spending, business freedom, investment freedom, monetary freedom and financial freedom. However, Singapore scores less favorably with regard to environmental sustainability, owing to a very low level of renewable electricity output and a high level of water stress. Overall, Singapore ranks 105 out of 210 economies based on our 2025 proprietary Environmental Sustainability Index.

The political landscape in Singapore remains stable, transparent and efficient. The new prime minister, Lawrence Wong, succeeded Lee Hsien Looing in May 2024 (both are from the People’s Action Party, PAP) and saw his mandate strengthened by the PAP victory in the May 2025 general election. He will continue to address medium- and long-term challenges such as social inequality, immigration, job-skill mismatches and the perception of an inadequate social safety net. Vulnerabilities in the political landscape arise from Singapore’s ethnic diversity, but escalated racial tensions are not likely due to constraints on press freedom and public demonstrations.