Singapore Raises 2026 Growth Forecast to 2%-4% as AI Demand Lifts Economy

Stronger factories and trade lift the outlook

Singapore raised its economic growth forecast for 2026 to 2% to 4% on February 10, after a surge in electronics demand and stronger production helped the economy expand 5% in 2025. The new forecast replaces the 1% to 3% range announced in November, as investment in artificial intelligence continues to support factories, exports and business services.

The Ministry of Trade and Industry (MTI) revised growth in the final quarter of 2025 to 6.9% compared with a year earlier, up from 4.6% in the third quarter. Its GDP growth announcement, published through the Singapore Department of Statistics, confirms both the quarterly expansion and the higher forecast for 2026.

The upgrade moves both ends of the forecast range up by one percentage point. Its midpoint rises from 2% to 3%, although even the upper end remains below the 5% expansion achieved in 2025. Singapore therefore expects another year of growth, but at a slower pace.

Manufacturing, wholesale trade, and finance and insurance provided the main support last year. Electronics producers benefited from demand for equipment used in AI, while an unexpected increase in production of valuable pharmaceutical ingredients also lifted output towards the end of 2025.

The gains were uneven. Restaurants faced weaker sales volumes, and businesses serving local consumers are expected to remain under pressure as residents spend more overseas and change their dining preferences. The stronger national outlook brings different prospects for a semiconductor supplier, a construction company and a restaurant operator.

What changed in the GDP figures?

Singapore's revised 5% growth for 2025 exceeded January's initial estimate of 4.8% and MTI's earlier forecast of around 4%. Gross domestic product, or GDP, measures the value of goods and services produced in an economy. Growth means that production has increased after allowing for price changes.

The fourth quarter accounted for a substantial part of the revision. Annual growth was raised from the January advance estimate of 5.7% to 6.9%, an increase of 1.2 percentage points. Another published account gave the initial estimate as 5.3%.

Growth compared with the immediately preceding quarter was also revised upwards, from 1.9% to 2.1%, after seasonal adjustment. This adjustment removes recurring patterns, such as changes associated with holidays, to make consecutive quarters easier to compare.

The two quarterly measures describe different comparisons. Output in the fourth quarter was 6.9% higher than a year earlier, but 2.1% higher than in the third quarter. The latter pace slowed from the third quarter's 2.6%, meaning the economy kept expanding while its immediate momentum eased.

Singapore's 2024 growth figure was separately revised from 4.4% to 5.3%. Using the updated figures, growth slowed by 0.3 percentage points in 2025. The last faster annual expansion was the 9.8% rebound in 2021, when activity recovered from the COVID-19 pandemic.

How the outlook shifted since November

MTI's November forecast assumed that economic activity in major trading partners would weaken as United States tariffs worked through global trade. By February, stronger results from the final months of 2025 had changed that assessment.

The main steps in the revision were:

• November 2025: MTI forecast Singapore's 2026 GDP growth at 1% to 3%, expecting pressure from US tariffs.
• January 2026: Advance estimates put full year growth in 2025 at 4.8% and fourth quarter annual growth at 5.7%.
• January 2026: Singapore's manufacturing purchasing managers' index reached its highest level in 10 months.
• February 10, 2026: MTI revised 2025 growth to 5%, raised fourth quarter annual growth to 6.9%, and upgraded the 2026 forecast to 2% to 4%.

Singapore also raised its forecast for growth in key exports in 2026 to 2% to 4%, from 0% to 2%. That revision points to stronger expectations for overseas sales alongside the improved outlook for production at home.

The purchasing managers' index, or PMI, tracks changes in manufacturing conditions through business surveys. January's improvement and a survey showing positive expectations for the next six months offered early signs that electronics demand was carrying into 2026.

Why AI investment matters to Singapore

Major technology companies had announced plans to invest more than US$660 billion, equivalent to about S$835 billion, in AI infrastructure during 2026. Such investment includes the computing equipment and facilities needed to train and operate AI systems.

Data centres require semiconductor chips to process information. Singapore's electronics industry supplies products into that market, giving local factories a connection to spending by technology companies overseas. MTI expects demand for these chips to support stronger electronics growth than it had previously forecast.

MTI chief economist Yong Yik Wei said the ministry had underestimated the strength of electronics demand associated with AI when preparing its growth forecasts for 2024 and 2025. Sustained momentum from that investment cycle is now included in the revised 2026 outlook.

The benefits extend beyond chip production. Precision engineering businesses make specialised parts and equipment used by manufacturers. Wholesale companies handle machinery, equipment and supplies. More demand for electronics can therefore bring orders to several parts of Singapore's economy.

DBS senior economist Chua Han Teng said manufacturing surveys continued to show support from electronics. He described the immediate signal this way:

"Incoming manufacturing sentiment data highlights electronics as a key driver of near-term resilience," he said.

Singapore's information and communications sector is also expected to benefit as businesses buy AI applications and other digital services. That creates a second route for growth, through the use of technology rather than only the production and movement of hardware.

Pharmaceuticals, finance and construction add support

Augustin Lee, MTI's Permanent Secretary for Energy and Trade, attributed part of the stronger result in 2025 to an unexpected increase in production of active pharmaceutical ingredients with high value towards the end of the year. These ingredients are the substances in medicines that produce their intended medical effects.

The increase supported biomedical manufacturing alongside the electronics expansion. Singapore's stronger factory performance therefore had more than one source, even though AI demand was central to the improved forecast.

Finance and insurance recorded growth across all segments in 2025, supported by financial conditions that were generally favourable. Lower interest rates can make borrowing less costly and support investment and financial activity. MTI expects supportive economic and financial conditions to continue helping the sector in 2026.

Transport engineering also has work ahead. Strong orders in aerospace, marine engineering and offshore engineering are expected to support activity. These businesses provide another source of industrial demand beyond electronics.

Public housing and civil engineering projects are expected to sustain construction, while launches of private residential developments should support property developers. For companies in these sectors, the outlook rests on building work and project activity as well as the strength of global trade.

Why restaurants and shops face a different year

Food and beverage services contracted in 2025, partly because restaurant sales volumes fell as dining preferences changed. MTI expects retail trade and food services to remain subdued in 2026, with residents directing some spending overseas.

A restaurant depends on customers walking through its doors or placing orders. An electronics factory may depend on investment decisions made by a technology company thousands of kilometres away. Those different customers help explain why strong GDP growth can coincide with difficult conditions for businesses serving local households.

The contrast also matters when judging the reach of the upgrade. MTI identified manufacturing, wholesale trade, and finance and insurance as the main engines of growth in 2025. Its latest outlook continues to favour businesses connected to technology investment and international activity, while expecting weaker conditions in some consumer services.

Construction provides a domestic source of support through public projects, but that activity follows a different spending channel from retail and dining. Singapore's expansion is spread across several industries, with the strength varying considerably between them.

Why tariffs have not stopped the expansion

Global trade held up better than MTI expected despite US tariffs. The ministry pointed to effective tariff rates below the headline rates announced, changes in supply chains that redirected trade, and strong exports associated with AI investment.

A tariff is a tax on imported goods. The rate businesses actually face can depend on which products they sell and the rules that apply to those goods. Supply chain adjustments can also change where products are made or shipped, altering trade flows as companies respond.

MTI expects stronger momentum from late 2025 to carry into 2026. Government policies intended to support demand in the United States, Germany and Japan, together with favourable global financial conditions, are also expected to help growth.

The US outlook includes support from AI investment and President Donald Trump's One Big Beautiful Bill. MTI expects US growth to be broadly stable in 2026, while weaker exports and industrial activity are expected to slow the eurozone. China's growth is projected to moderate, and consumption and investment should support major Southeast Asian economies.

Trade barriers remain a constraint. MTI expects the impact of US tariffs across a full year, together with rising restrictions, to weigh on trade outside AI. Chua of DBS similarly warned that delayed tariff effects could restrain global commerce and leave Singapore's exports outside electronics under pressure.

Economists raise forecasts and watch monetary policy

Bank economists moved their Singapore forecasts higher after the stronger results. DBS raised its projection from 1.8% to 2.8%, while OCBC chief economist Selena Ling increased hers from 2% to 3%. Barclays economist Brian Tan raised his forecast from 2.5% to 3.5%.

Maybank economists Chua Hak Bin and Brian Lee, and UOB associate economist Jester Koh, forecast growth of 3.6%. Standard Chartered economists Edward Lee and Jonathan Koh kept their projection at 3.2%. All fall within MTI's revised range.

The stronger outlook has also sharpened discussion about the Monetary Authority of Singapore's next policy decisions. MAS left policy unchanged in January. Its chief economist, Edward Robinson, reiterated that the central bank was in an appropriate position to respond to risks to price stability over the medium term.

Singapore manages monetary policy mainly through the exchange rate rather than a benchmark interest rate. Allowing the Singapore dollar to strengthen faster against a basket of currencies can reduce the local cost of imports and help contain inflation.

Maybank and UOB economists expect tightening in April. UOB's Koh anticipates an increase of 50 basis points, or half a percentage point, in the annual appreciation slope of the currency policy band, taking it to 1%. Barclays' Tan expects a similar move in July instead.

OCBC's Ling does not make an April move her main forecast, although she sees a possibility of tightening during 2026. She cited a tight labour market and potential increases in electricity, utilities and transport costs, alongside higher carbon taxes. MAS had announced no tightening decision at the February 10 briefing.

The main risk runs through the same AI boom

MTI sees the possibility of stronger growth if AI investment exceeds expectations again. More spending could lift electronics orders and global trade, while gains in share prices could support consumption.

Augustin Lee, the ministry's Permanent Secretary for Energy and Trade, also warned at the February 10 briefing that tariffs and geopolitical tensions could disrupt that outlook:

"A renewed escalation in tariff actions or flare-ups in geopolitical tensions could lead to a resurgence in economic uncertainty," Mr Lee said.

A sudden reduction in global AI investment is another risk. Fewer orders would affect electronics suppliers directly, while sharp falls in financial markets could spread the effects to investment and spending more widely.

Singapore's revised forecast therefore brings together two forces: a technology investment cycle that has repeatedly exceeded expectations, and trade restrictions that continue to weigh on other exports. Whether AI spending stays strong is central to how much of the brighter outlook becomes actual production, sales and business activity in 2026.

Key Points

• Singapore raised its 2026 GDP growth forecast to 2% to 4%, from 1% to 3%.
• The economy grew 5% in 2025, above the initial 4.8% estimate and below the revised 5.3% growth in 2024.
• Fourth quarter GDP rose 6.9% from a year earlier and 2.1% from the preceding quarter after seasonal adjustment.
• AI demand, pharmaceutical production, wholesale trade and financial services supported growth.
• Restaurants and retailers face weaker conditions, while public construction and industrial orders provide support elsewhere.
• Renewed tariffs, geopolitical tensions and a sudden reduction in AI investment are the main risks identified by MTI.
• Economists are watching the April monetary policy review, with some expecting tightening then and others later.