Sector expanded 4.3% in 2025; low-rate environment to sustain loan demand despite moderating growth expectations.

2025 Sector Performance: Banking and Insurance Lead Growth

Singapore’s finance and insurance sector expanded 4.3% in 2025, moderating sharply from the 7.3% growth recorded in 2024, according to FPA Financial’s February 2026 market review. Growth was concentrated in banking and insurance segments, with sustained credit intermediation supported by accommodative financial conditions and robust performance in life insurance. In contrast, the fund management segment saw subdued activity, reflecting weaker global market conditions and reduced risk appetite among institutional investors.

The moderation was anticipated as base effects diminished and global financial conditions tightened unevenly across asset classes. Banking institutions benefited from stable net interest margins in the low-rate environment, while life insurers recorded strong premium inflows driven by demand for savings and protection products. The fund management segment’s underperformance was tied to volatile equity markets and reduced capital deployment into Asia-focused funds.

2026 Outlook: Accommodative Conditions and Loan Growth Moderation

The Monetary Authority of Singapore (MAS) expects the finance and insurance sector to remain supported by broadly accommodative macroeconomic and financial conditions in 2026. A low-interest-rate environment, driven by expectations that the U.S. Federal Reserve will hold rates steady, should encourage borrowing and sustain loan demand, particularly in the early part of the year. MAS also anticipates that loan growth will stay resilient before moderating as the year progresses, reflecting a more cautious economic outlook.

Medium-term growth prospects remain intact. FPA Financial projects the financial services sector will grow at a compound annual growth rate (CAGR) of 4.0% from 2024 to 2029, underscoring sustained expansion potential. This trajectory depends on continued credit intermediation, stable insurance demand, and gradual recovery in fund management activity as global market conditions stabilise.

Sector Hiring and Sentiment: Muted Confidence

Despite the supportive macroeconomic backdrop, hiring intentions in Singapore’s finance and insurance sector remain weak. The ManpowerGroup Employment Outlook Survey for Q2 2026 reports a Net Employment Outlook of 11% for the sector, near the bottom of all industry rankings in Singapore. In contrast, the national average Net Employment Outlook stands at 24%. Finance and Insurance also recorded the sharpest quarter-on-quarter decline among all sectors tracked, falling by 23 percentage points from the previous quarter.

Globally, the picture is more favourable. The worldwide Finance and Insurance sector posted a Net Employment Outlook of 35% in Q2 2026, up 2 percentage points from the previous quarter, indicating that Singapore’s insurance hiring market is underperforming the global trend.

Net Employment Outlook (%) (%)Source: Orionmano Industries

Business sentiment has also softened. The Singapore Business Federation’s National Business Survey for Q4 2025 shows the finance confidence index slipped to 54.3 from 58.0 in Q3 2025, marking a steady decline from 59.1 in Q1 2025. Index scores between 40 and 59 indicate neutral sentiment, but the downward trajectory signals weakening confidence in near-term profitability. Insurers and banks expect slower profits in 2026, a view that contrasts with the broader economy, where the overall profitability index rose to 52.1 from 48.5 over the same period.

Structural Tailwinds: Digitalisation and AI Adoption

Beyond cyclical factors, structural initiatives are strengthening Singapore’s position as a global financial hub. Digitalisation and the growing adoption of AI tools are enhancing the sector’s efficiency while prioritising transaction security. In July 2025, MAS launched “Pathfinder,” a programme aimed at supporting financial institutions at the start of their journey to adopt artificial intelligence. Pathfinder is the first of four initiatives MAS is rolling out to guide responsible and widespread AI adoption in the financial sector. The remaining initiatives focus on anchoring AI capabilities in Singapore, addressing governance and risk management through guidelines, and preparing the workforce for job roles transformed by AI.

MAS is also pursuing growth in the Insurance-Linked Securities (ILS) market. The regulator hopes that a vibrant ILS market will provide additional insurance capacity through capital markets financing, covering natural catastrophes, longevity, mortality, operational risks, and cyber-risks, thereby narrowing the protection gap in Asia. MAS has adopted a three-pronged approach to grow the ILS market and ecosystem in Singapore.

Risks to the Outlook: Inflation and Global Uncertainties

The outlook faces headwinds from elevated inflation and geopolitical disruptions. MAS’s April 2026 Monetary Policy Statement raised the forecast for MAS Core Inflation to 1.5–2.5% for 2026, from the previous 1.0–2.0% range. Energy supply shortfalls and higher input costs continue to weigh on the Singapore economy, with significant uncertainty around shipping flows through the Strait of Hormuz. Accumulated energy supply shortfalls and higher input costs will exert drags on value-added in energy-dependent industries such as petrochemicals and transport.

Nevertheless, continued global AI-related capex spending and resilient regional electronics production should sustain activity in Singapore’s technology-related sectors. A steady pipeline of domestic public infrastructure and housing investment will also support growth.

The sector’s resilience in 2026 hinges on balancing accommodative monetary conditions with inflation risks and global uncertainties, while structural initiatives like AI adoption and ILS market development support long-term competitiveness. Sustained loan demand and insurance premium growth in the near term face potential disruption from geopolitical shocks and higher input costs, but Singapore’s positioning as a regional financial hub provides a buffer against cyclical downturns.