The OCBC SME Index climbed to 50.8 in the fourth quarter of 2025, a slight increase from the 50.5 reading observed over the previous two quarters, marking its third straight quarter in expansionary territory.

According to Elaine Heng, OCBC’s head of global commercial banking, externally oriented small and medium-sized enterprises (SMEs) generally outperformed those focused on the domestic market. Mirroring the third quarter, SMEs in sectors such as manufacturing, information and communications technology (ICT), and wholesale trade continued to be the primary growth drivers.

Heng noted that while the growth momentum from the fourth quarter could extend into the initial months of 2026, the full-year outlook for 2026 is likely to moderate due to a high base of comparison from 2025, coupled with rising operating costs and intensifying regional competition. She added that SME owners are expected to maintain a cautious stance this year, despite Singapore's relatively robust economic performance.

The GDP growth Nowcast derived from the OCBC SME Index for the fourth quarter stands at approximately 5%, up from the 4.3% recorded in the prior quarter. This figure aligns with the advance GDP estimates from the Ministry of Trade and Industry, which projected a year-on-year growth of 5.7% for the same period.

In his New Year's address on December 31, 2025, Prime Minister Lawrence Wong announced that Singapore's economy expanded by a "stronger-than-expected" 4.8%, surpassing the 4.4% growth seen in 2024. Striking a measured tone, Wong acknowledged the positive outcome but cautioned that maintaining such a rapid growth pace would be challenging, urging realism.

Based on the OCBC SME Business Outlook survey, 36% of the nearly 700 SME owners polled in the fourth quarter identified fierce market competition as their most significant challenge for the next six months. Geopolitical uncertainties were the second most cited concern, selected by 20% of respondents.

OCBC's report indicates that SME growth momentum is expected to soften due to a combination of external and internal factors. Externally, policy and economic uncertainties in the United States, along with questions about the sustainability of the artificial intelligence boom, could dampen business confidence. Internally, SMEs face pressures from escalating operational expenses and intense competition from Chinese exporters.

Nevertheless, the bank highlighted several potential areas of opportunity for SMEs to explore.

Firstly, integrating into global value chains and collaborating with large multinational corporations could unlock new business prospects.

Secondly, leveraging cross-border initiatives, such as the Johor-Singapore Special Economic Zone, can aid SMEs in expanding their footprint and strengthening supply chain resilience.

Thirdly, SMEs should monitor the upcoming Budget announcement, which may introduce schemes designed to enhance operational efficiency and boost productivity.

The budget statement for 2026 is scheduled to be delivered on February 12 by Wong, who also serves as Singapore's Finance Minister.