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

Singapore’s economic growth forecast has been revised upwards, with the trade and industry ministry projecting annual growth to reach 4.5%-5.5% in 2026. This optimistic outlook is driven by the ongoing artificial intelligence (AI) boom, which is boosting trade and offsetting the negative effects of ongoing conflict in the Middle East.

The GDP increased by 5.9% in the second quarter, surpassing both the government’s initial estimate of 5.7% and the median forecast of 5.8% in a Bloomberg survey. The AI investment boom has been stronger than expected, leading to increased technology-related exports and growth in sectors like electronics, precision engineering, and machinery.

Despite rising energy costs due to the Iran war, the impact has been less severe than initially feared, as energy prices have been capped by drawdowns in oil inventories and a shift to alternative energy sources. The government has nearly doubled its support package, including cash vouchers and rental assistance, to help households and businesses cope with higher costs.

The Monetary Authority of Singapore (MAS) has also implemented two consecutive policy tightening measures to curb inflation, which is expected to pick up from July and remain elevated through mid-2027. Prime Minister Lawrence Wong stated that Singapore’s growth momentum is expected to continue, benefiting from the rapid growth of AI while navigating the uncertain geopolitical environment.