Singapore upgrades 2026 GDP growth forecast to "4.5-5.5%", citing stronger AI-related demand

GDP growth came in at 6.1% year-on-year in the first half of 2026, according to MTI's latest update.

Singapore has upgraded its 2026 GDP growth forecast to "4.5 to 5.5%", up from the previous forecast of "2.0 to 4.0%", following better-than-expected economic performance in the first half of the year.

The Ministry of Trade and Industry (MTI) said on 11 August 2026 that the upgrade also reflects an improved outlook for the rest of the year, driven by an acceleration in global AI-related capital expenditure.

Singapore’s economy grew 5.9% year-on-year in the second quarter of 2026, easing from 6.3% growth in the previous quarter. On a quarter-on-quarter seasonally adjusted basis, the economy expanded by 1.4%, extending the 1.2% growth recorded in the first quarter.

Looking at first half of the year, Singapore’s GDP growth came in at 6.1% year-on-year.

According to MTI, the second-quarter expansion was driven by the strong performance of the manufacturing, wholesale trade, and finance & insurance sectors. In particular, "robust global AI-related demand" boosted growth in the electronics and precision engineering clusters within manufacturing, as well as the machinery, equipment & supplies segment of wholesale trade.

The finance & insurance sector also expanded, supported by the banking segment on the back of strong credit growth and fee-generating activities.

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

AI investment lifts economic outlook

MTI said the global AI investment boom has been stronger than expected since its previous forecast in May, providing “significant tailwinds” to AI-related production and exports globally. For the rest of 2026, a further acceleration in AI-related capital expenditure is expected to lift the growth prospects of economies plugged into the global technology value chain.

The economic impact of the US-Israel-Iran conflict has also been less severe than initially feared, MTI added. However, it shared, tensions in the Middle East, alongside lower global oil inventories, are expected to keep energy and other key input prices elevated in the second half of the year.

These elevated costs are expected to put upward pressure on global inflation and weigh on global economic activity, while US tariffs are expected to continue affecting exports in impacted economies.

Against this backdrop, MTI said Singapore’s external demand outlook for the year has improved compared with its May assessment. The outlook for Singapore’s AI-linked sectors has consequently strengthened, while sectors directly affected by supply disruptions arising from the Middle East conflict remain weaker.

Among the latter, the chemicals cluster is expected to remain the most adversely affected, with firms in the petroleum and petrochemicals segments continuing to cut production amid disruptions to crude oil and feedstock supplies. Elevated fuel costs are also expected to dampen demand in the water and air transport segments, while growth in accommodation is expected to remain subdued partly due to higher travel costs.

On the other hand, the acceleration in global AI-related capital expenditure would likely boost growth in the electronics and precision engineering clusters.

Services sectors expected to remain resilient

Among outward-oriented services, both the information & communications and finance & insurance sectors are expected to register firm growth. Information & communications growth is projected to be boosted by strong AI-linked enterprise demand, while finance & insurance is expected to benefit from firm credit growth alongside the expansion of domestic and regional economic activity.

Meanwhile, construction will continue to be supported by a robust pipeline of public and private projects, and the real estate sector is expected to benefit from healthy developer activity, resilient demand for private residential properties and sustained rental demand for commercial properties.

However, dampened consumer sentiment amid inflationary pressures could weigh on retail trade and food & beverage services, although government support measures such as the CDC Vouchers are expected to cushion the impact.

Snapshot: Q2 2026 performance

In further updates, manufacturing expanded 12.5% year-on-year in Q2 2026, while wholesale trade grew 8.3%. At the same time, finance & insurance expanded 6.2%, followed by information & communications at 5.0%and real estate at 4.6%. 

Additional growth recorded was as follows:

1. Transportation & storage: +3.0%
2. professional services: 2.4%
3. Administrative & support services: 2.3%
4. Food & beverage services: 1.5%

On the labour front, employment increased by 14,000 in the second quarter, while the seasonally adjusted unemployment rate remained at 2.0%. Further, the overall unit labour cost fell 0.4% year-on-year, while value added per actual hour worked rose 3.9%.