Singapore raises growth forecast to as high as 5.5% on AI boom

Singapore's economy grew 5.9% in the second quarter, exceeding the government's initial estimate of 5.7%, surpassing both the Bloomberg survey median of 5.8% and the previous upward revision. The Ministry of Trade and Industry (MTI) projected GDP for 2026 to range between 4.5% and 5.5%, reflecting the economic benefits of the AI boom.

This is the second revision upward in the growth outlook, with the initial forecast set at 1%-3% in 2024 and then raised to 2%-4% in February. The surge in global AI investment has bolstered technology-related exports, while energy-intensive sectors faced higher crude costs. Manufacturing and wholesale trade were the leading contributors to growth, while finance and insurance saw strong credit growth.

The services sector expanded overall, except for food and beverage, which contracted due to fewer visitors. The ministry attributed the less severe economic impact of the Middle East conflict than initially anticipated to the drawdown of oil inventories and alternative energy substitutions. Despite higher energy prices due to ongoing tensions, the government announced a near doubling of its support package to mitigate the cost burden on households and businesses.

The Monetary Authority of Singapore (MAS) implemented two consecutive rounds of policy tightening to curb inflation, which is expected to rise starting July and persist through mid-2027. Prime Minister Lawrence Wong affirmed that Singapore's growth momentum will likely continue, citing the rapid AI growth despite uncertain geopolitical circumstances.

The economy expanded by 1.4% on a seasonally adjusted basis from the prior quarter, outpacing the 1.2% estimate.