Singapore expects economic activity to cool in 2026 as US tariffs weigh on global demand, after nearly doubling estimates for this year to around 4 percent on the back of a strong third-quarter.

Gross domestic product growth next year will ease into a range of 1 percent to 3 percent, the Ministry of Trade and Industry said Friday, providing its first 2026 outlook.

“I think the risk factors are real,” Beh Swan Gin, MTI permanent secretary, said during a media briefing. “We continue to be concerned that there could always be a re-escalation of the trade tensions.”

He added that officials generally expect 2 percent to 3 percent growth given the maturity of Singapore’s economy, and that the expected range for next year “isn’t being unduly pessimistic.”

The Singapore dollar was steady at 1.3077 versus the greenback after the data was released.

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The 2025 upgrade, following a similar boost in August, comes as trade-reliant Singapore weathers the impacts of President Donald Trump’s global tariff onslaught and benefits from the investment boom in artificial intelligence.

The year-on-year growth was mainly driven by the manufacturing, wholesale trade, and the finance and insurance sectors, the MTI said in a statement. Within the manufacturing sector, growth was led by the electronics, transport engineering and biomedical manufacturing clusters, it added.

Singapore has seen solid manufacturing and export demand, driven largely by an AI capex boom that’s supercharged orders for chips, servers and other electronic components. That momentum appears to be continuing into the fourth quarter, with non-oil exports last month surging 22 percent, almost triple the expected pace, helped by electronics shipments up 33 percent.

“For the rest of the year, demand for AI-related electronics should continue to support our manufacturing and wholesale trade sectors,” the ministry said.

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Gross domestic product grew 4.2 percent year-on-year in the third quarter, according to the ministry’s final estimates. That compares with a 4 percent forecast in a Bloomberg News survey and a revised 4.7 percent the previous quarter.

On a seasonally adjusted quarterly basis, GDP expanded 2.4 percent, matching the survey estimate and up from a revised 1.7 percent in the previous three months.

Singapore’s central bank left monetary policy unchanged at its final review of the year in October, given this year’s stable economic performance and tame inflation. The Monetary Authority of Singapore, which conducts four policy reviews annually, is expected to deliver its next decision in January.

MAS Chief Economist Edward Robinson said during the briefing that “the monetary policy stance remains appropriate,” while adding that the central bank is “well placed to respond to risks to medium-term price stability,” following its two easing moves earlier this year.

Singapore — where trade accounts for more than three-times GDP — has also benefited from having a relatively low US tariff rate of 10 percent.

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A build-up in inventories by US companies since the middle of the year has also been a supporting factor for Singapore’s economy, according to economists at Maybank Securities Pte.

The outlook for the final quarter remains solid, with manufacturing activity remaining in expansionary territory in October and the electronics gauge outperforming.

“With fourth quarter export growth anticipated to remain firm, the economy is firing on multiple cylinders, along with a construction boom, falling interest rates and generous fiscal support,” Maybank’s Brian Lee wrote in a note ahead of Friday’s release.

In August, the ministry revised its 2025 growth estimate to 1.5 percent to 2.5 percent.