Singapore lifts 2026 growth forecast as AI boom offsets Middle East risks
Singapore raises 2026 GDP forecast to 4.5-5.5% on AI investment boom and less severe Middle East fallout after Q2 growth beat estimates.
Singapore's trade ministry has raised its economic growth forecast for 2026 to 4.5-5.5%, up from an earlier projection of 2.0-4.0%. The upgrade follows second-quarter GDP growth of 5.9% year-on-year, which surpassed the advance estimate of 5.7%.
The ministry attributed the improved outlook to a stronger-than-expected global surge in artificial intelligence investment and a less damaging impact from the Middle East conflict than initially feared. Sectors tied to the AI-driven technology cycle are expected to benefit, while those directly affected by supply disruptions from the conflict remain weak.
The government does not anticipate any impact from the 12.5% US tariff on Singapore exports, according to Beh Swan Gin, permanent secretary for trade.
Maybank economist Chua Hak Bin said the economy looks set to maintain momentum in the second half, with oil prices well below their highs. He noted that the AI boom, safe-haven capital inflows, and a construction upsurge could carry the strong first-half performance forward, and did not rule out growth exceeding the revised forecast.
GDP expanded 1.4% quarter-on-quarter on a seasonally adjusted basis in April-June, above the advance estimate of 1.1%. For the first half of the year, growth stood at 6.1%.
Separately, Enterprise Singapore upgraded its forecast for non-oil domestic export growth this year to 14-16%, from a previous 3-5%. The agency said the global economy has remained more resilient than expected, supported by sustained AI-related demand and capital expenditure.
The Monetary Authority of Singapore expects growth to stay firm for the rest of 2026, though it has flagged the sustainability of the AI investment boom as a key risk. The central bank tightened monetary policy in late July, citing persistent inflationary pressures from elevated energy costs linked to the Middle East conflict.
The government announced a S$900 million support package last month to help households and businesses cope with high energy prices, adding to nearly S$1 billion announced in April. Inflation forecasts for 2026 were raised to 1.5-2.5% for both core and headline measures, from 1.0-2.0% previously. Annual inflation was 1.6% in June, with the central bank expecting it to rise and stay elevated through the first half of next year.