AI is Singapore's growth engine — just not the only one, economists say

Singapore's Ministry of Trade and Industry has lifted its 2026 GDP growth forecast to 4.5 to 5.5 per cent after a stronger-than-expected first half, and economists are calling the upgrade a bullish signal — one powered largely by the global AI investment boom. The move follows second-quarter growth of 5.9 per cent, with the ministry pointing to an expected acceleration in AI-related capital spending worldwide.

The upgrade lands at a moment when Singapore's export machine is clearly running on AI demand: non-oil domestic exports surged 27.4 per cent year-on-year in Q2, the strongest first-half showing since 2010. MTI permanent secretary Beh Swan Gin told reporters that AI is a major contributor to the economy, but stopped short of calling it the whole story — a view economists broadly echoed.

OCBC chief economist Selena Ling described the revised forecast as "a bullish signal, largely attributable to the global AI investment boom." But the more striking take came from BMI's Lee Yen Nee, who argued Singapore is not overly reliant on AI even though it is currently the primary growth driver. Construction, finance, insurance and infocomm are all expanding independently of the AI cycle, she noted — and even a sharp cooldown in 2027 would likely mark the end of an exceptional export run rather than trigger a crisis. Oxford Economics' Sheana Yue made a similar point, framing AI as the anchor of a broader ecosystem spanning electronics, manufacturing, trade and investment, with pharmaceuticals and public infrastructure spending also pulling their weight. Maybank has meanwhile raised its own 2026 call to 5.2 per cent.

There are caveats. MTI flagged weakness in the chemicals cluster, hit by supply disruptions tied to the Middle East conflict, and warned that inflationary pressure could keep dampening retail and food-and-beverage spending. The AI tailwind is real, but it is not evenly distributed across the economy.

Why it matters for Singapore: This is the clearest official signal yet that the AI boom is now the country's headline growth story — and equally important, that policymakers are deliberately managing the risk of over-reliance. For businesses, the takeaway is straightforward: AI-linked sectors (electronics, data centres, trade finance) are where the momentum is, while the diversified base provides the cushion if the global capex cycle cools. For workers and investors, it means the Smart Nation bet is paying off in the near term — but the city-state is keeping its options open rather than putting all its chips on one technology.