Singapore: Growth set to run above potential – UOB

UOB economist Jester Koh highlights that Singapore’s 2Q26 Gross Domestic Product (GDP) was revised up to 5.9% year-on-year and 1.4% quarter-on-quarter, driven by AI-related strength in manufacturing and modern services. MTI raised its 2026 GDP forecast to 4.5%-5.5%, while UOB now projects 5.0% growth, expecting AI-linked capex and finance sector credit demand to support above-potential expansion despite tourism headwinds.

AI tailwinds lift Singapore growth outlook

"MTI upgraded its full-year 2026 Singapore GDP growth forecast range to "4.5 to 5.5 per cent" from "2.0 to 4.0 per cent" previously (note), reflecting better-than-expected 1H performance and an improved 2H outlook due to an acceleration in global AI-related capital expenditure, which could lift the growth prospects of economies integrated into the global technology value chain."

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"We upgrade our 2026 GDP growth forecast slightly to 5.0% (from 4.8% prev; 2027F: 3.2%), with AI-related tailwinds continuing to support growth in 2H26, although momentum in the semiconductor/electronics-related sectors could moderate."

"Our baseline GDP growth projections remain relatively conservative, assuming below-trend growth of 0.5% q/q sa in both 3Q26 and 4Q26, implying 2H26 growth of 4.0% y/y (vs 1H26: 6.1%)."

"While MTI continues to cite downside risks to global growth (escalation and broadening of the ME conflict, additional US tariff actions, sharp correction in financial markets), MTI noted that Singapore’s external demand outlook for the year has improved compared with its assessment in May. US growth is expected to remain resilient on AI-related investment, although softer consumption amid sustained inflationary pressures could weigh on 2H growth."

"Growth is likely to run significantly above potential amid structural AI-related tailwinds, supported by the carryover from strong 2025 (5.0%) GDP growth."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)