Singapore

Growth outlook hurt by Middle East conflict

Risks arising from tensions in the Gulf will weigh on Singapore’s economic growth, with GDP growth projected to slow from 5% in 2025 to 2.5% in 2026 and 2.4% in 2027. Higher business costs and shortages of crude oil and its derivatives have affected major industries such as the fuel and chemical sectors, with several petrochemical and specialty chemical companies having claimed force majeure due to supply chain disruptions and raw material shortages. Higher fuel costs have also disrupted air and water transport segments of the broader transportation (8% of GDP in 2025) industry. At the same time, there are two powerful supports from the AI and construction booms that are buttressing Singapore’s growth. The AI-related investment boom has continued to drive growth for the electronics and precision engineering sectors. Non-oil domestic exports (NODX) of electronics surged nearly 70% year-on-year in the first five months of 2026, compared to just 3.3% for non-electronics NODX. The country has successfully integrated itself into the high-value-added segments of the AI equipment supply chain, accounting for approximately 10% of global semiconductor production. Micron Technology, one of the leading manufacturers of electronic chips, has begun to build its new wafer fabrication plant in Singapore, confirming the island nation’s appeal. Construction activity is driven by major infrastructure mega-projects (Changi Terminal 5, Cross-Island Line, Tuas Mega Port, North-South Corridor, Jurong Island expansion), commercial expansions (MBS, RWS) and public housing. The Building and Construction Authority (BCA) has forecast construction demand of S$47-53 billion in 2026. Tourism also performed strongly in 2025, contributing S$32.8 billion to the economy, a 10% year-on-year increase. The sector's momentum is expected to continue, being underpinned by significant public investment, as the government plans to inject an additional S$740 million into the Tourism Development Fund over the next five years.

The general outlook for businesses has deteriorated slightly since the outbreak of the conflict in the Middle East, particularly for the maritime and air transportation, biomedical and chemical sectors. Given the expected economic slowdown, both employment growth and wage growth are projected to weaken compared to the gains seen in 2025.

Consumer inflation pressure has been relatively steady so far but is expected to increase in the future as higher costs work their way through the supply chain. Import and domestic supply prices have surged to hit double-digit growth rates since March. Inflation is therefore expected to rise until early 2027 to reach approximately 2.5%. In response, the Monetary Authority of Singapore tightened monetary policy in April by increasing the slope of the SGD Nominal Effective Exchange Rate (S$NEER). Safe-haven capital inflows are boosting liquidity in the banking system and are containing domestic interest rates.

Fiscal and external accounts remain strong

The current account surplus has been wide in 2026 and the trend is expected to continue in 2027, although its share of GDP is likely to decline. The projected decline is primarily due to a larger primary income deficit, which reflects the increase in foreign investment in Singapore (a 140% increase between 2015 and 2025). Second, a slight deterioration in the balance of goods and services is expected given the overall slowdown in trade: global merchandise trade has grown by only 1.5-2.5% in 2026, compared with 4.7% in 2025. Foreign exchange reserves have declined slightly since 2025 but are still at an adequate level and covered 5.14 months of imports (of goods and services) in the first quarter of 2026. In the medium term, Singapore’s current account surpluses will remain solid but are expected to decline due to increased infrastructure and social spending.

In spite of a significant increase in public spending following the pandemic (+48% compared to the pre-pandemic era), the government has generally balanced its budget so far thanks to the economic recovery and the implementation of fiscal measures such as the goods and services tax (GST) increase. For fiscal year 2025, Singapore generated an overall budget surplus of 1.3% of GDP. In 2026 and 2027, the budget balance is expected to remain in surplus, albeit smaller than in 2025, due to the combined effect of a less favourable macroeconomic environment and increased public support efforts. On the revenue side, the slowdown in economic growth will automatically weigh on tax revenues. In particular, the moderation in economic activity is expected to curb revenues from corporate and consumption taxes due to lower profit margins and weaker demand. On the expenditure side, the 2026 budget, which was presented on 12 February, aims to help households manage the cost of living and support businesses operating in a high-cost environment by offering a 40% corporate tax refund for the 2026 tax year, capped at $30,000. Measures have also been implemented to assist low-income workers, such as enhanced support for training. Furthermore, given the accelerated ageing of the population (a ratio of one elderly person for 3.3 working adults), health care spending is expected to continue to rise.

While public debt is high on paper, it is used to create a domestic safe asset market and is mainly composed of long-term bonds and securities. In addition, large reserves built up in the past from previous fiscal surpluses and investment returns (200-300% of GDP) can be used to fund any rare budget deficits. The banking sector is heavily exposed to real estate: 33.8% of outstanding domestic commercial loans were allocated to real estate, land development and construction in the first quarter of 2026. The non-performing loan ratio for this sector improved, falling from 1.71% in the first quarter of 2024 to 1.13% in the first quarter of 2026, i.e., a level slightly lower than that of commercial bank loans overall (1.18%). That said, capital and liquidity buffers remain strong and above regulatory requirements. Domestic financial conditions, while stable, remain vulnerable to stress in regional and global financial markets, which are currently characterised by a stock market correction, a rise in the VIX (volatility index), widening corporate credit spreads and higher benchmark interest rates. Tighter lending conditions in Singapore, combined with higher production costs, could further impact growth.

Stable governance and balanced, albeit fragile, foreign relations

Singapore’s political landscape remains highly stable, with the People’s Action Party (PAP) retaining a dominant position since independence in 1965. In the May 2025 general election, the PAP secured a qualified parliamentary majority of nearly 90%, reinforcing its governing mandate. Following the elections, Prime Minister Lawrence Wong, who took office in May 2024, instigated a cabinet reshuffle that nonetheless largely preserved continuity in key portfolios, including trade and industry, finance, home affairs and foreign affairs. The move emphasised policy consistency and administrative continuity. While the key opposition party, the Workers’ Party, has gained electoral support and parliamentary presence in recent elections, it is substantially smaller than the PAP and is not in a position to challenge its governing majority in the near term. Singapore’s governance framework is generally characterised by effective public administration, institutional continuity and high levels of public trust. At the same time, policymakers continue to address socioeconomic challenges, including expensive dwellings, income inequality and labour market pressures affecting lower-income and lower-skilled workers, including segments of the migrant workforce. The post-transfer Gini coefficient stood at 0.359 in 2025, indicating that inequality is still a policy consideration despite extensive redistribution measures.

Singapore occupies a unique position in balancing ties between the US and China within the Southeast Asian region. The small state has maintained close economic and political ties with both superpowers but may find itself increasingly challenged to navigate the growing competition between the US and China amid rising global geopolitical tensions. As close neighbours, Singapore and Malaysia have a long-standing and multifaceted relationship, with robust ties involving bilateral trade, investment and tourism. Both countries recently signed an agreement on the Johor-Singapore Special Economic Zone (JS-SEZ), which aims to improve cross-border business and connectivity. The JS-SEZ will unite Singapore’s strength as a business and financial hub and the state of Johor’s abundant land, energy and labour supply resources. Singapore is also fostering closer ties with Indonesia. At their annual summit held in Jakarta on 6 July, the two countries signed 26 agreements covering sectors such as energy, supply chains and digital technologies.

Payment

Cheques, cash and bank transfers are all frequently-used means of payment within Singapore. Bank transfers, fast and secure, are widely used for international transactions. Standby Letters of Credits and Irrevocable Letters of Credit are often used in export transactions.

Debt Collection

Amicable phase

The amicable phase begins with the seller contacting buyers in writing, by telephone and, where permissible, by visiting the buyer’s business premises. If there is no response from the buyer, a site visit and online searches are conducted to ascertain the operating and legal status of the buyer. If the buyer does not make attempts to settle the matter amicably, legal proceedings can be used to recover payments for goods sold and delivered in Singapore. It is, however, prudent to ensure that the buyer has sufficient assets to satisfy the debt before proceedings are initiated.

Legal proceedings

Singapore is a common law jurisdiction. Its laws are principally governed by Supreme Court of Judicature Acts, State Court Acts, other statutes which have procedural application (or contain procedural provisions), the Rules of Court, practice directions, case law and the court’s inherent?powers.

Singapore’s courts comprise State (Subordinate) Courts and the Supreme Court. The Supreme Court is composed of the High Court and the Court of Appeal (the final appellate court). The High Court is a court of first instance, generally used for claims beyond the jurisdiction of the State Courts (although the High Court is a court of unlimited jurisdiction and may hear any claim).

Default Judgment

If a defendant fails to enter an appearance or fails to file a defence within the time specified in the writ, the plaintiff may enter default judgment against him. This can be a final judgment or an interlocutory judgment, depending on the nature of the claim.

Summary Judgment

If the defendant has entered an appearance and filed a defence, but it is clear that the defendant has no real defence to the claim, the plaintiff can apply to court for summary judgment. To avoid summary judgment being entered, the defendant must show that the dispute concerns a triable issue, or that there is some other reason for trial. An application for summary judgment must be filed within 28 days of pleadings being concluded (unless the court orders otherwise).

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Enforcement of a Legal Decision

WRITS OF EXECUTION

A judgment can be enforced by a variety of writs of execution. These include a Writ of Seizure and Sale of movable and immovable property, a Writ of Delivery and a Writ of Distress. These writs authorise court officials to take appropriate measures to give effect to the judgment.

GARNISHEE PROCEEDINGS

This can be an appropriate solution when the debtor is owed a debt by a third party (the garnishee). When the creditor garnishes the debt, the garnishee must then make payments due to him, rather than to the debtor. To collect these debts, the creditor must first apply for a garnishee order nisi. This can be filed without the involvement of other parties and leads to “show cause” proceedings. If the garnishee confirms that there are monies due and owing to the judgment debtor at this stage, the Registrar may proceed to make the garnishee nisi?absolute.

REGISTRATION OF JUDGMENT

If the creditor is not able to enforce his judgment in Singapore, he may be able to enforce it in a country where the debtor holds assets. This can be done by commencing fresh proceedings, or by registering the Singapore judgment in the foreign country (on the basis of reciprocity of enforcement between the two countries).

Insolvency Proceedings

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SCHEMES OF ARRANGEMENT

Schemes of arrangement begin with an application to court, for an order summoning one or more meetings of the creditors, members of the company, or shareholders of the company. If the court agrees to the order, a proposal must then be tabled before the relevant meetings and approved by the requisite majority (unless the court orders otherwise) of the creditors, class of creditors, members or class of members, shareholders, or class of shareholders.

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JUDICIAL MANAGEMENT

When a company is in financial difficulty but has reasonable prospects of being rehabilitated, or if preserving all or part of its business as a going concern (or even that the interests of creditors would be better served than by resorting to a winding up), the company or its creditors can apply to court for an order that the company be placed under the judicial management of a judicial manager.

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LIQUIDATION

If an insolvent company is unable to overcome its difficulties, it can be dissolved. This enables the liquidation of its assets, so that creditors can be repaid, at least in part. This process is known as winding up or liquidation. A healthy company can also be subject to winding up if its members no longer wish the business to continue. When a company is wound up, its assets or proceeds are first used to pay off any creditors. Following this, any balance remaining is distributed pro rata amongst shareholders.

Last updated:July 2026