Strength at Home, Caution Abroad

RECAP OF KEY DEVELOPMENTS FROM THE PREVIOUS WEEK

Global factory activity improved in January, supported by stronger export demand, according to S&P Global PMI data. However, services sector growth remained subdued, weighed down by softer financial services activity.

In the United States, India agreed to cease imports of Russian oil under a new trade arrangement that will see US tariffs on Indian goods lowered. President Trump also signed a USD1.2 trillion budget to end the recent partial government shutdown.

Central bank decisions were mixed. The Reserve Bank of Australia raised its cash rate by 25 basis points to 3.85%. The European Central Bank and Bank of England held rates steady, while the Reserve Bank of India maintained its policy rate and revised near-term GDP growth projections higher.

SINGAPORE IN FOCUS

Growth Outlook and Budget 2026

For Singapore-based investors and businesses, this week’s key focus is domestic growth momentum and fiscal policy direction.

Singapore will release its final 4Q25 and full-year 2025 GDP data on Tuesday, 10 February. The final 4Q25 GDP figure is expected to be revised higher to 6.0–6.5% year-on-year, from the preliminary estimate of 5.7%, supported by a stronger-than-expected contribution from the biomedical manufacturing cluster. As a result, full-year 2025 growth is likely to be revised up to around 5.0%, compared with the earlier estimate of 4.8%.

Looking ahead, the Ministry of Trade and Industry is likely to maintain its 2026 growth forecast range of 1% to 3%, reflecting high base effects from 2025 and the risk of quarterly growth volatility amid a more challenging global environment.

The week culminates with Singapore’s FY2026 Budget statement on Thursday, 12 February, delivered by Prime Minister and Finance Minister Lawrence Wong. This will be the first Budget under the new Cabinet following the May 2025 General Election, setting the tone for medium-term policy priorities.

Unlike the one-off SG60 Budget last year, FY26 Budget is expected to be more targeted and structurally focused, balancing continued support for households with measures to strengthen competitiveness. While headline and core inflation moderated in 2025, early signs of reflation remain. For 2026, headline and core CPI are projected to average 1.0–2.0%, up from 0.7% and 0.9% respectively last year, suggesting the need for ongoing but calibrated fiscal support.

Healthcare and social spending are likely to rise further as the government continues to implement the Forward Singapore recommendations unveiled in October 2023. For businesses, Budget measures are expected to reinforce Singapore’s role as a global and regional hub, with particular emphasis on AI adoption, productivity enhancement, workforce reskilling, and helping companies diversify markets amid rising global protectionism.

From a fiscal perspective, a larger-than-budgeted surplus of SGD8–9 billion (around 1.0% of GDP) is expected for FY2025, supported by strong corporate income tax, stamp duty, betting taxes, and customs and excise duties. For FY2026, a moderate surplus of S$6–8 billion is projected, underscoring continued fiscal discipline.

ASIA, JUST BEYOND OUR SHORES

In Japan, financial markets reacted following the ruling Liberal Democratic Party’s decisive election victory, which secured a two-thirds supermajority in the lower house. Japanese equities rose, while the yen and government bonds came under pressure as markets priced in expectations of more aggressive fiscal spending and tax cuts, developments that have unsettled Japanese financial markets in recent weeks.

In China, attention turns to inflation trends, with January CPI expected to ease to around 0.4%. Additional releases include the house price index, which is likely to show a 31st consecutive month of decline, alongside credit data that will shed light on the effectiveness of recent policy support.

Elsewhere in the region, India will release inflation data, Australia publishes consumer and business sentiment indicators, Taiwan releases January trade data, and Malaysia reports 4Q GDP figures.

THE WIDER WORLD

In United States, the recent partial US federal government shutdown has delayed several key economic releases. The US jobs report, originally scheduled for 6 February, has been postponed to Wednesday, 11 February, while the inflation report will be released on Friday, 13 February. Additional data due this week include December retail sales and January existing home sales.

Markets will also monitor speeches by Federal Reserve officials for policy signals. Corporate earnings remain a major focus, with results expected from McDonald’s, Coca-Cola, Cisco Systems, Applied Materials, Shopify, Airbnb, Spotify, Moderna, and Ford.

In Europe, the Eurozone will release its second GDP estimate, after preliminary data showed 0.3% quarter-on-quarter growth. The UK faces a full data week, including Q4 GDP, trade figures, and industrial production, as policymakers continue to highlight concerns over labour market softness.