Total loan growth accelerated to 6.24% by March 2026 as business lending recovered in trade-related sectors and lower rates spurred housing loans.

After contracting in 2023, Singapore's domestic credit intermediation rebounded strongly, with resident loans rising 6.1% in 2025 driven by an 8.7% manufacturing expansion and a pickup in housing loan demand amid declining interest rates.

1. Macro Backdrop: Robust Economic Growth in 2025

The Singapore economy expanded 5% in 2025, according to the Ministry of Trade and Industry (MTI), slightly below the 5.3% recorded in 2024 but representing sustained above-trend growth. In the fourth quarter alone, GDP grew 5.7% year-on-year, with all sectors contributing positively to output. Manufacturing recorded the strongest sectoral expansion at 8.7%, driven by electronics and AI-related products. Wholesale trade grew 6.1%, construction 5.2%, real estate 5.0%, and finance & insurance 4.3%.

The robust economic environment was underpinned by significantly eased financial conditions. The 3-month SORA fell from 3.59% in Q3 2024 to 1.72% in Q3 2025, a decline of 187 basis points that reduced borrowing costs across the economy. This monetary easing created a tailwind for both business investment and household borrowing decisions.

GDP Growth (%)Source: Orionmano Industries

2. Loan Growth Drivers: Manufacturing Recovery and Housing Demand

Resident nonbank lending grew 5.2% in 2024 and accelerated to 6.8% year-on-year in the first nine months of 2025, according to the ASEAN+3 Macroeconomic Research Office (AMRO). The full-year 2025 resident loan growth was 6.1%, and by March 2026 the headline total loans growth figure had risen to 6.24%, as reported by CEIC Data.

Business loan recovery was initially driven by trade-related industries and became broad-based by mid-2024. Momentum picked up again in 2025 amid tariff uncertainty, as firms engaged in front-loading of exports ahead of US tariff deadlines. The Monetary Authority of Singapore (MAS) highlighted in its Financial Stability Review that resident credit growth was underpinned by lending to trade-related sectors, which were buoyed by front-loading of exports and strong global demand for electronics linked to AI-related products.

Household loans climbed steadily, underpinned by strong demand for housing and bridging loans as interest rates fell. The decline in SORA translated directly into lower mortgage rates, supporting both new purchases and refinancing activity in the residential property market. Bank lending to consumers and businesses expanded 6.2% in the 12 months to Q3 2025, contributing to 9.5% M2 money supply growth, per MAS data.

The loan expansion occurred against a backdrop of sustained economic momentum that persisted into the first three quarters of 2025. AMRO noted that GDP expanded 4.3% year-on-year over that period, thanks to a delay in US reciprocal tariff implementation to August 7 and continued front-loading activities in the region ahead of that deadline.

3. Banking Sector Resilience in 2025

Loan growth occurred alongside sound asset quality and strong capital buffers, reinforcing the strength of credit intermediation. The overall non-performing loan (NPL) ratio declined for a fifth consecutive quarter to 1.2% in Q2 2025, with all major segments registering lower NPL ratios than a year ago. Provisioning coverage increased to 137% in Q2 2025, up from 113% a year earlier, indicating that banks have strengthened precautionary buffers against a potential rise in credit costs given the uncertain economic environment.

The banking sector remains well capitalized. The capital adequacy ratio (CAR) stood at 18.2% and Tier 1 CAR at 16.7% in Q3 2025, well above minimum regulatory requirements. MAS reported that banks maintained healthy liquidity positions and stable loan-to-deposit (LTD) ratios throughout 2025. Leverage vulnerabilities for both residents and non-residents were assessed as low amid strong capital buffers.

These metrics confirm that the 2025 credit expansion was not accompanied by deteriorating credit quality. Instead, banks used robust earnings to build additional provisioning coverage, reflecting prudent risk management in an environment where the growth trajectory was supported by genuine economic fundamentals rather than speculative excess.

Outlook

While resident lending momentum is expected to continue into 2026, risks from US tariff policies and global demand shifts could temper trade-related loan growth. Lower interest rates and AI-driven manufacturing may provide offsetting support. The electronics upcycle and AI-related production have been key drivers of Singapore's manufacturing and wholesale trade performance, and these structural trends appear durable. However, the timing and magnitude of further tariff actions remain a source of uncertainty for trade-finance demand. The banking sector's strong capital and liquidity positions provide a buffer should credit demand moderate, but the pace of loan growth will depend critically on the trajectory of global trade policy and the resilience of external demand.