Singapore has significantly raised its economic growth and export forecasts for 2026, citing a stronger-than-expected performance in the first half of the year, driven by the global artificial intelligence boom.

The Ministry of Trade and Industry now expects gross domestic product to expand by 4.5% to 5.5% in 2026, up from an earlier estimate of 2.0% to 4.0%. The economy grew by 6.1% year-on-year in the first half of this year. The upward revision reflects the better-than-anticipated first-half results and an improved outlook for the rest of the year, fueled by an acceleration in global AI-related capital expenditure, the ministry said.

At a press conference on Tuesday, Permanent Secretary Beh Swan Gin noted that the economic impact of the Middle East conflict has been less severe than initially feared. While a blockade of the Strait of Hormuz disrupted global energy supplies and other key intermediate inputs, the rise in energy prices has been contained through the use of oil stockpiles and the search for alternative energy sources, Beh added. However, he cautioned that ongoing regional tensions and low global oil inventories are expected to keep energy and other key input costs elevated in the second half of the year, which could push up global inflation and weigh on economic activity.

Meanwhile, Enterprise Singapore has raised its 2026 forecast for non-oil domestic exports to 14.0% to 16.0%, up from a previous range of 3.0% to 5.0%. The government agency expects exports to continue benefiting from sustained AI-related demand in the second half of the year, optimistic outlooks from major electronics firms, and firmer prices for key electronics exports.

In a report ahead of Tuesday's data release, DBS Senior Economist Chua Han Teng said Singapore's manufacturing sector should continue to benefit from AI-related demand. He added that massive investments from large technology companies are supporting demand for electronics and precision engineering products, including memory chips, server components, and semiconductor equipment.

However, Enterprise Singapore cautioned that a higher comparison base could slow export growth in the second half of the year. The agency also highlighted risks to the outlook, including a prolonged Middle East conflict and higher US tariffs. Beh Swan Gin said the government expects the new US 12.5% tariffs, which took effect in July and affect about one-third of Singapore's exports to the US, will not have a significant impact on the city-state's trade.

Revised data showed GDP grew 5.9% year-on-year in the second quarter, up from the 5.7% preliminary estimate released in July. The first-quarter growth rate was 6.3%. On a seasonally adjusted quarter-on-quarter basis, the economy expanded 1.4% in the second quarter, beating the 1.1% preliminary estimate, compared to a revised 1.2% growth in the first quarter.