Singapore raises 2026 GDP growth forecast to 4.5%-5.5%; economy grew 5.9% in Q2

“In particular, robust global AI-related demand boosted growth in the electronics and precision engineering clusters of the manufacturing sector, as well as the machinery, equipment and supplies segment of the wholesale trade sector,” the ministry said in a press release.

It added that growth in the finance and insurance sector was driven by the banking segment, supported by strong credit growth and fee-generating activities. 

However, the food and beverage services sector contracted, partly due to a sustained increase in outbound travel by locals and a decline in visitor arrivals in the second quarter.

OUTLOOK FOR 2026

MTI said Singapore’s external demand outlook has improved compared with its assessment of the economy in May.

The global AI investment boom has been stronger than expected, providing significant tailwinds to AI-related production and exports. A further acceleration in AI-related capital expenditure is expected to lift the growth prospects of economies plugged into the global technology value chain, MTI said.

Meanwhile, the economic impact of the Middle East conflict has been less severe than initially feared. The drawdown in oil inventories and substitution to alternative energy sources have capped the rise in global energy prices, although continuing tensions are expected to keep prices higher in the second half of the year.

That will put upward pressure on global inflation and weigh on global economic activity, while US tariffs could also weigh on the exports of affected economies.

Looking to Singapore’s trading partners, GDP growth in the US is expected to remain resilient, supported in part by rising AI-related investment, although growth could moderate in the second half of the year as consumption softens amid persistent inflationary pressures.

The Eurozone’s outlook for the rest of the year has weakened because elevated energy prices could prompt further rate hikes and pose a drag on domestic demand. 

For China, growth is expected to be slower in the second half of the year due to easing export growth and subdued domestic consumption. GDP growth forecasts for Taiwan and South Korea have been upgraded, with the stronger-than-expected AI investment boom expected to continue boosting their exports.

Growth forecasts for most key Southeast Asian economies have also been upgraded on expectations of strong AI-related exports, although weaker consumer demand amid elevated inflation could weigh on growth in the second half of the year.