Singapore has raised its 2026 economic growth forecast to between 4.5% and 5.5%, citing stronger-than-expected performance in the first half of the year and a more favourable outlook for the months ahead.
The Ministry of Trade and Industry (MTI) upgraded its forecast from the previous range of 2% to 4%, with accelerating global spending on artificial intelligence expected to provide further support to the economy.
Singapore’s economy grew 5.9% year-on-year in the second quarter, slightly above the earlier advance estimate of 5.7% but slower than the 6.3% expansion recorded in the first quarter.
On a quarter-on-quarter seasonally adjusted basis, GDP expanded 1.4% in the second quarter, extending the 1.2% growth recorded in the first quarter. For the first half of 2026, the economy expanded 6.1% year-on-year.
Manufacturing, wholesale trade and finance and insurance were the main drivers of growth during the quarter.
MTI said robust global AI-related demand boosted Singapore’s electronics and precision engineering clusters, while the machinery, equipment and supplies segment also benefited from stronger activity.
The finance and insurance sector, meanwhile, was supported by the banking segment, with strong credit growth and fee-generating activities contributing to its performance.
Not all sectors performed as strongly. Food and beverage services contracted during the quarter, partly due to sustained growth in outbound travel by Singapore residents and a decline in visitor arrivals.
AI Investment Lifts External Outlook
MTI said Singapore’s external demand outlook has improved compared with its assessment in May, largely due to the stronger-than-expected global AI investment cycle.
The ministry expects further acceleration in AI-related capital expenditure to lift growth prospects for economies integrated into the global technology supply chain.
The impact of the Middle East conflict has also been less severe than initially feared, with oil inventory drawdowns and the substitution towards alternative energy sources helping to limit the rise in global energy prices.
However, continued tensions are expected to keep energy prices elevated in the second half of the year, putting upward pressure on global inflation and weighing on economic activity.
US tariffs also remain a potential drag on exports from affected economies.
Key Trading Partners
Among Singapore’s major trading partners, the US economy is expected to remain resilient, supported partly by rising AI investment. However, growth could moderate in the second half as consumption weakens amid persistent inflationary pressures.
The outlook for the Eurozone has deteriorated, with elevated energy prices potentially prompting further rate hikes and weighing on domestic demand.
China’s growth is expected to slow in the second half of the year as export growth eases and domestic consumption remains subdued.
Growth forecasts for Taiwan and South Korea have been upgraded, with continued AI investment expected to support their exports.
Most major Southeast Asian economies have also received upgraded growth forecasts, reflecting expectations of stronger AI-related exports. However, weaker consumer demand amid elevated inflation could weigh on growth later in the year.
CNA
