SINGAPORE: The Ministry of Trade and Industry (MTI) on Tuesday (Aug 11) raised Singapore’s economic growth forecast for the year, citing a “better-than-expected performance” in the first six months of 2026 and an improved outlook for the rest of the year.

MTI now expects the economy to grow by 4.5 per cent to 5.5 per cent this year, up from its previous forecast of 2 per cent to 4 per cent.

The economy grew 5.9 per cent in the second quarter of 2026, slightly higher than the advance estimate of 5.7 per cent, but easing from the 6.3 per cent growth reported in the first quarter.

MTI previously upgraded Singapore's growth forecast in February, from an earlier forecast of 1 per cent to 3 per cent. Growth for the rest of the year is expected to be supported by an acceleration in global AI-related capital expenditure, the ministry said.

On a quarter-on-quarter seasonally adjusted basis, Singapore's economy expanded by 1.4 per cent, extending the 1.2 per cent growth in the first quarter. For the first half of the year, GDP grew 6.1 per cent year-on-year.

Growth in the second quarter was driven by the strong performance of the manufacturing, wholesale trade and finance and insurance sectors, said MTI.

"In particular, robust global AI-related demand boosted growth in the electronics and precision engineering clusters of the manufacturing sector, as well as the machinery, equipment and supplies segment of the wholesale trade sector," the ministry said in a press release.

It added that growth in the finance and insurance sector was driven by the banking segment, supported by strong credit growth and fee-generating activities. 

However, the food and beverage services sector contracted, partly due to a sustained increase in outbound travel by locals and a decline in visitor arrivals in the second quarter.

OUTLOOK FOR 2026

MTI said Singapore's external demand outlook has improved compared with its assessment of the economy in May.

The global AI investment boom has been stronger than expected, providing significant tailwinds to AI-related production and exports. A further acceleration in AI-related capital expenditure is expected to lift the growth prospects of economies plugged...