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Singapore sharply raises 2026 growth forecast, cites AI-driven boost and resilient external environment
At a glance
- MTI raised 2026 GDP forecast to 4.5%5.5%, up from a prior 2%4% range.
- Revised Q2 growth came in at 5.9%, stronger than the 5.7% advance estimate.
- Manufacturing, wholesale trade, and finance and insurance were the quarters main growth engines.
- AI-related sectors and exports are contributing to the upgraded outlook.
- Dampened energy-price pressures from inventory drawdowns and fuel substitution reduced the expected impact of the U.S.-Iran conflict.
- Core inflation rose to 1.6% in June; headline inflation was 1.9%.
- MAS tightened monetary policy in late July amid concerns about rising imported costs.
Economic outlook
Singapore on Tuesday raised its full-year economic growth forecast for 2026 to 4.5%5.5%, more than doubling the lower bound of an earlier projection and reflecting stronger-than-expected activity in the first half of the year and an uptick in AI-related sectors and exports.
The Ministry of Trade and Industry (MTI) said the new range replaces its previous 2%4% forecast and follows revised second-quarter data showing the city-states economy expanded 5.9% year-on-year, up from 5.7% in advance estimates. MTI highlighted manufacturing, wholesale trade, and finance and insurance as the main drivers of the stronger Q2 performance.
MTI also noted that the economic fallout from the U.S.-Iran conflict has been less severe than feared. A drawdown in oil inventories and a shift toward alternative energy sources helped cap the rise in global energy prices, lessening potential inflationary pressure on Singapore.
Policy and inflation implications
This is the second upward revision to MTIs 2026 outlook: at the start of the year the ministry had forecast growth of 1%3%. The stronger momentum gives Singapores policymakers more room to respond to inflation dynamics. The Monetary Authority of Singapore (MAS) unexpectedly tightened policy in late July, citing the likelihood of rising imported costs in coming quartersdriven by higher fuel and electronic input prices and adverse weather in key suppliers.
On the inflation front, Singapores core inflationexcluding accommodation and transportationrose to 1.6% in June from 1.4% in May, near the bottom of MASs 1.5%2.5% range for the year. Headline inflation was 1.9% in June.
The upgraded forecast and the stronger Q2 print suggest the economy has greater underlying resilience than previously judged, powered by a rebound in trade-exposed sectors and an emerging contribution from AI-related investment and services. Policymakers will balance sustaining growth with containing inflationary pressures as external cost drivers, such as fuel and electronic inputs, evolve.
In short, Singapores economy is growing faster than expected this year, supported by manufacturing, trade and financial services, while a moderated global energy shock and a nascent AI boost have together helped lift the outlook.
