The OCBC SME Index rose to 50.8 in 4Q2025, up from 50.5 in the past two quarters. This is the third consecutive quarter the index has remained in expansionary territory.
OCBC’s head of global commercial banking, Elaine Heng, says externally oriented SMEs generally outperformed their domestic-facing counterparts. Similar to 3Q2025, SMEs operating in areas such as manufacturing, ICT and wholesale trade continue to be the main drivers of growth.
“While growth momentum from 4Q25 could carry into the first few months of 2026, the outlook for 2026 is likely to ease coming from a high base in 2025, due to higher operating costs and stronger market competition in the region,” Heng says, noting that SME business owners will continue to take a cautious approach this year. This is in spite of the relatively strong performance of Singapore’s economy.
The GDP growth Nowcast based on the OCBC SME Index for 4Q2025 is around 5%, up from the 4.3% registered in the last quarter. This is aligned with the Ministry of Trade and Industry’s GDP advance estimates, which are projected to be at 5.7% y-o-y in 4Q2025.
Prime Minister Lawrence Wong announced in his New Year message on December 31, 2025 that Singapore’s economy had grown by a “stronger-than-expected” 4.8%, up from 4.4% in 2024. Wong struck a measured tone in his remarks, adding that while it is a “better outcome than we expected,” Singapore need to be realistic because “sustaining this pace of growth will be difficult.”
Based on the OCBC SME Business Outlook poll, 36% of the roughly 700 SME business owners polled in 4Q2025 see stiff market competition as the biggest challenge to their businesses in the next six months. The next biggest challenge, chosen by 20% of respondents, is geopolitical uncertainties.
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In their report, OCBC says SMEs will experience softening momentum from a combination of external and internal factors. On the external front, both the policy and economic uncertainties taking place in the US as well as the sustainability of the AI boom could weigh on business confidence. As for the internal front, SMEs will have to contend with rising operating costs and strong market competition from Chinese exporters.
To be sure, OCBC says there are some opportunity areas that SMEs can tap on.
Firstly, SMEs will be able to seize new business opportunities if they integrate themselves into the global value chain and work with big MNCs.
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Secondly, tapping on cross-border initiatives like the Johor-Singapore Special Economic Zone will help SMEs to expand and build up their supply chain resilience.
Thirdly, SMEs may want to keep a lookout for the upcoming Budget announcement which could include schemes to help them boost their efficiency and raise productivity.
The 2026 budget statement is set to be delivered on Feb 12 by Wong, who is also Singapore’s finance minister.
