Singapore’s upgraded economic outlook a ‘bullish signal’ of AI-driven expansion, but other sectors also contributing: Experts

SINGAPORE: Singapore’s move to upgrade its GDP forecast for 2026 signals confidence in artificial intelligence-related growth, but it does not mean that the country is overly reliant on the technology as other sectors also contribute to the overall economy, economists said.

Their comments come after the Ministry of Trade and Industry (MTI) raised its 2026 forecast to 4.5 per cent to 5.5 per cent on Tuesday (Aug 11), with the ministry flagging better-than-expected performance in the first half of the year and an expected acceleration in global AI-related capital expenditure.

“The upgraded forecast is certainly a bullish signal, largely attributable to the global AI investment boom,” said OCBC chief economist Selena Ling.

But MTI also said the outlook remains weak for parts of the economy directly affected by supply disruptions from the Middle East conflict, including the chemicals cluster of the manufacturing sector.

Dampened consumer sentiments amid inflationary pressures could also weigh on the retail trade and food and beverage services sectors, said the ministry.

During a media briefing, MTI’s permanent secretary Beh Swan Gin said AI is a major contributor to the economy, but Singapore is not solely dependent on it. Economists echoed that view.

“I wouldn’t characterise Singapore’s economy as overly reliant on AI, although it is the primary growth driver right now,” said Ms Lee Yen Nee, country risk analyst at BMI, which is owned by Fitch Solutions.

She said the economy remains diversified, and some sectors not directly linked to the AI boom are growing steadily, including construction, finance and insurance, and information and communications. 

“Even if the AI boom does cool significantly in 2027, it would just mark an end of an exceptionally strong export cycle for Singapore and not likely cause a crisis,” she said.

Ms Sheana Yue, senior economist at Oxford Economics, also said Singapore’s current expansion is not “solely dependent” on AI.

“The AI cycle is supporting a broader ecosystem spanning electronics, manufacturing, trade and investment, while pharmaceuticals and public infrastructure spending are also contributing to growth,” she said.

RAISING FORECASTS

With the latest report showing robust growth in the second quarter of the year, several economists have also upgraded their GDP forecasts.

Maybank analysts wrote in a note that they raised their forecast from 4.8 per cent to 5.2 per cent for this year, and from 3.1 per cent to 3.3 per cent for next year. 

They noted that their projections are at the upper end of MTI’s revised forecast and implies 4.3 per cent growth for the second half of the year.

“The global AI capex boom, domestic construction boom and safe haven capital inflows remain powerful drivers that will support growth in the second half,” said Maybank, adding that manufacturing, wholesale trade, finance and infocomm are likely to remain leading growth drivers.