Singapore has sharply raised its 2026 economic growth forecast, betting that a stronger-than-expected global artificial intelligence (AI) boom will continue to drive manufacturing, technology exports, and financial activity.
The Ministry of Trade and Industry (MTI) lifted its forecast to 4.5%-5.5%, from its previous range of 2%-4%. It is the second upgrade this year, after the government initially forecast growth of 1%-3%.
The upgrade followed stronger-than-expected first-half performance. Singapore’s economy expanded 5.9% year on year in the second quarter, slightly ahead of the 5.7% advance estimate, taking the first-half growth to 6.1%.
Manufacturing was a major driver, expanding 12.5% in the second quarter, compared with 7.3% in the first. Growth was led by electronics and precision engineering as global demand for AI-related hardware remained strong.
Wholesale trade grew 8.3%, supported by higher sales of machinery and equipment, telecommunications products, computers, and electronic components. Finance and insurance expanded 6.2%, helped by stronger bank lending, fee income, and fund-management activity.
MTI said the global AI investment boom had been stronger than expected and was providing significant support to economies embedded in the global technology supply chain. Further increases in AI-related capital spending could provide additional momentum for Singapore during the rest of the year.
“Against this backdrop, the 2026 outlook for sectors of the Singapore economy that are linked to the AI-driven technology cycle has improved, although that for sectors directly affected by supply disruptions arising from the Middle East conflict remains weak,” the ministry said.
Economists have also raised their forecasts. Maybank lifted its 2026 growth projection to 5.2% from 4.8%, while UOB raised its estimate to 5% from 4.8%. RHB maintained its 4.5% forecast but warned that Singapore remained vulnerable to a slowdown in AI investment.
The government said the economic impact of the Middle East conflict had also been less severe than initially feared, as countries drew on oil inventories and switched to alternative energy sources, limiting the rise in energy prices.
However, higher fuel and commodity costs remain a risk, while US tariffs could weigh on exports. Singapore currently does not expect a significant impact from a 12.5% US tariff affecting about a third of its exports to America.
The Monetary Authority of Singapore also faces a delicate balancing act. Core inflation rose to 1.6% in June, while headline inflation reached 1.9%. Higher energy and input costs could put further pressure on prices.
Last month, it tightened its monetary policy, citing persistent inflationary risks like the Iran war and the elevated energy prices. The government has already announced an SUSD 900 million support package to help households and businesses cope with high energy prices, on top of the almost SUSD 1 billion announced in April.
Despite the upbeat outlook, MTI warned that geopolitical tensions, US trade policy, and a sudden reversal in AI investment remain risks. Chemicals, petrochemicals, and some consumer-facing sectors may remain under pressure.
However, Beh Swan Gin, Singapore’s Permanent Secretary for Trade, differed with the MTI, as he said that the city-state’s administration does not anticipate an impact from the 12.5% American tariff on Singapore exports.
“With the fog of war lifting and oil prices well below their highs, the economy looks set to keep sailing in the second half,” Maybank economist Chua Hak Bin said.
Chua said the AI boom, safe-haven capital inflows, and a construction upsurge could carry the strong first-half momentum into the rest of the year, adding that growth could again exceed the government’s upgraded forecast.
In a separate statement, Enterprise Singapore upgraded its forecast for growth this year in non-oil domestic exports to 14% to 16%, from 3% to 5% previously.
“The global economy has remained more resilient than expected, bolstered by the sustained AI-related demand and capex spending,” the government department remarked.
For now, however, Singapore’s position in the global AI supply chain is giving the trade-dependent economy a powerful new growth engine.