UOB Global Economics and Markets Research has increased its 2026 GDP growth forecast for Singapore to 4.8%, up from the previous 4.0%, following a robust first half of the year. The revision comes after Singapore’s economy recorded its fifth consecutive quarter of growth, with a 1.1% quarter-on-quarter seasonally adjusted increase and a 5.7% year-on-year rise in the second quarter of 2026.
The growth was primarily driven by the manufacturing sector, which saw a significant 5.3% quarter-on-quarter seasonally adjusted increase, bolstered by strong demand in the electronics and precision engineering clusters. This demand is largely attributed to AI-related needs for semiconductors and manufacturing equipment. However, the sector faced challenges from weaker chemicals output due to disruptions in the Middle East.
Non-manufacturing sectors experienced a slowdown, with construction declining by 2.1% quarter-on-quarter seasonally adjusted, and services growing by a modest 0.3%. The wholesale and retail trade, along with transportation and storage, saw a decline, reflecting reduced port activity and softer retail sales volumes amid weaker inbound tourism.
UOB’s report highlights that AI-related demand is expected to continue supporting growth into the third quarter of 2026. However, potential risks include a re-escalation of the Middle East conflict, which could lead to increased energy prices and tighter monetary policies globally. This scenario might impact AI-related equities and capital expenditure plans, potentially affecting the electronics cycle.
The Monetary Authority of Singapore is anticipated to maintain its current policy stance through 2026 and into 2027, although there is a heightened risk of policy adjustments due to recent geopolitical developments.
