By Xinghui Kok and Jun Yuan Yong
SINGAPORE, Aug 11 (Reuters) – Singapore raised its economic growth forecast for 2026 on Tuesday, saying a stronger-than-expected global artificial intelligence investment boom and a milder impact from the Middle East war should support activity in the second half of the year.
The trade ministry now expects growth of 4.5%-5.5% this year, up from 2.0%-4.0% after second-quarter GDP expanded 5.9% from a year earlier, above an advance estimate of 5.7%.
The ministry said fallout from the Iran war had been less damaging than feared, while the global AI investment surge had exceeded expectations.
“Against this backdrop, the 2026 outlook for sectors of the Singapore economy that are linked to the AI-driven technology cycle has improved, although that for sectors directly affected by supply disruptions arising from the Middle East conflict remains weak,” the ministry said.
The government also does not anticipate an impact from the 12.5% U.S. tariff on Singapore exports, said Beh Swan Gin, permanent secretary for trade.
“With the fog of war lifting and oil prices well below their highs, the economy looks set to keep sailing in the second half,” Maybank economist Chua Hak Bin said.
Chua said the AI boom, safe-haven capital inflows and a construction upsurge could carry the strong first-half momentum into the rest of the year, adding that growth could again exceed the government’s upgraded forecast.
For the first half of the year, GDP growth was 6.1%, the trade ministry said.
‘MORE RESILIENT THAN EXPECTED’
On a quarter-on-quarter, seasonally adjusted basis, gross domestic product expanded by 1.4% in the April-June period, compared with an advance estimate of 1.1% growth.
In a separate statement, Enterprise Singapore upgraded its forecast for growth this year in non-oil domestic exports to 14% to 16%, from 3% to 5% previously.
“The global economy has remained more resilient than expected, bolstered by the sustained AI-related demand and capex spending,” Enterprise Singapore said.
The Monetary Authority of Singapore has said it expects growth to stay firm for the rest of 2026, although it has flagged the sustainability of the AI investment boom as a major risk.
The central bank unexpectedly tightened monetary policy in late July, citing persistent inflationary risks as the Middle East conflict keeps energy cost pressures elevated.
Also last month, the government announced a S$900 million support package to help households and businesses cope with high energy prices, on top of the almost S$1 billion announced in April.
In April, the central bank raised both its core and headline inflation forecasts for 2026 to a range of 1.5% to 2.5%, from 1.0% to 2.0% previously.
Annual inflation was 1.6% in June, and the central bank expects it to pick up and stay elevated for the first half of next year. July inflation data will be released later this month.
(Reporting by Xinghui Kok and Jun Yuan Yong; Editing by John Mair and Shri Navaratnam)
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