Singapore’s Ministry of Trade and Industry (MTI) has substantially raised its 2026 GDP growth forecast to a range of 4.5% to 5.5%, up from the previous 2.0% to 4.0%. This adjustment follows a robust second quarter (Q2) performance, where GDP growth was revised to 5.9% year-on-year, driven by strong AI-related capital expenditure.
The upward revision reflects better-than-expected performance in the first half of the year and an optimistic outlook for the second half, bolstered by global AI-related investments. According to UOB Global Economics and Markets Research, the manufacturing, wholesale trade, and infocomm sectors experienced significant growth due to these AI-related tailwinds. Manufacturing, in particular, saw a 6.3% quarter-on-quarter increase, supported by demand in electronics and precision engineering.
However, tourism-related sectors faced challenges, with rising jet fuel costs impacting inbound tourism. Retail trade, accommodation, and food and beverage services all recorded declines in Q2.
Despite these challenges, the MTI remains optimistic about Singapore’s external demand outlook, citing resilient US growth and stronger-than-expected AI investments in Taiwan and South Korea. The financial sector is also expected to benefit from increased credit demand.
Looking ahead, UOB has slightly upgraded its 2026 GDP growth forecast to 5.0%, with AI-related factors continuing to drive growth. However, the semiconductor and electronics sectors may see moderated momentum. The upcoming SG-JB RTS Link, set to begin operations in January 2027, could also influence economic dynamics by increasing outbound spending by residents.
