(July 14): Singapore’s economy is on track to outperform the government’s own full-year growth forecast as global demand for artificial intelligence (AI)-related electronics continues to offset geopolitical headwinds.
Gross domestic product in the second quarter grew 5.7% from the previous year, based on advance estimates released on Tuesday by the Ministry of Trade and Industry (MTI). While slower than the 6.3% in the preceding quarter, that beats the 5.5% median forecast in a Bloomberg survey and keeps the city state well above the MTI’s latest full-year growth projection of 2%-4%.
Manufacturing was the only sector that accelerated year-on-year, which the MTI said was largely from electronics and precision engineering driven by strong AI-related demand. Meanwhile, construction and all services slowed.
After the data, the Singapore dollar was up 0.1% to 1.2934 versus the greenback.
Economists say continued strength in AI-related manufacturing and construction has kept Singapore’s economy resilient despite uncertainty stemming from the Middle East conflict, with several forecasting growth above the government’s forecast range.
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The AI-related manufacturing boom “still has legs to run”, said Selena Ling, the chief economist of Oversea-Chinese Banking Corp (OCBC), adding that the bank had upgraded its full-year growth forecast to 4.3%. Even if manufacturing moderates in the second half, there’s still upside risk to the official outlook, she said.
Following Tuesday’s data, United Overseas Bank Ltd raised its 2026 growth forecast to 4.8% from 4%, highlighting supportive AI tailwinds.
The MTI will likely upgrade its own full-year forecast to 3%-5% when final second-quarter economic figures are released in August, said Brian Lee, an economist at Maybank Securities Pte Ltd. He added there could be further upside to his full-year forecast for 4.6%.
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On a seasonally adjusted quarterly basis, the economy grew 1.1%, compared with the median estimate of 1.3% in the Bloomberg poll.
While growth continues to be strong in Singapore, “consumer facing sectors like food and beverage continue to lag”, said Jonathan Koh, an Asian economist and foreign exchange analyst at Standard Chartered plc, adding that business expectations are soft for the industry. Emerging concerns over AI-related job disruptions may also add to consumer caution even as the labour market remains healthy overall.
Earlier in June, Prime Minister Lawrence Wong warned the economy has yet to feel the full impact of the war, and uncertainty remains over the nation’s growth and inflation outlook. Higher global energy prices will also begin feeding through to households, with electricity rates set to rise by a record 17% in the third quarter.
The Monetary Authority of Singapore will decide on its policy settings no later than July 31, with economists largely forecasting a hold after benign inflation data for May.
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