AI boom lifts 2027 growth outlook to 4%

The MTI substantially raised its own 2026 growth forecast to a range of 4.5% to 5.5%.

Singapore's economy is now expected to grow 5.7% in 2026, up from an earlier forecast of 4.6% and well above the 4% consensus, before moderating to 4% in 2027 from a previous projection of 3%, as the AI boom and multiple growth engines sustain momentum, according to Nomura.

Its upgraded 2026 projection sits above the government's own revised range, with growth expected to hold up at 5.3% in the second half of the year after the economy surged 6.1% in the first half.

The revision followed an upward adjustment to second-quarter gross domestic product (GDP) data. The Ministry of Trade and Industry (MTI) reported that growth eased modestly to 5.9% year on year (YoY) in the second quarter (Q2), revised up from an advance estimate of 5.7%, after surging 6.3% in the first quarter (Q1). In sequential terms, growth rose to 1.4% quarter on quarter in Q2 from 1.2% in Q1, pointing to still-solid momentum despite the war in Iran.

The upward revision was broad-based. Services-producing industries were revised up to 4.9% YoY from 4.6%, with finance and insurance growth rising to 6.2% and wholesale trade holding strong at 8.3%.

Manufacturing growth was revised up to 12.5% from 12.2%, sharply higher than the 7.3% recorded in Q1 amidst broadening AI-related demand. The improvements more than offset a downward revision in construction growth to 5.8%.

The MTI substantially raised its own 2026 growth forecast to a range of 4.5% to 5.5%, up from 2% to 4%. It said the impact of the global AI investment boom had been stronger than expected, while the impact of the Iran war had been less severe than initially feared. The ministry expects AI-related sectors to continue lifting growth alongside construction activity and financial services.

Nomura said the global tech uptrend and broadening AI demand were likely to remain intact, boosting electronics manufacturing output, supported by new capacity such as Micron's S$9.5b high-bandwidth memory plant. It added that trade-related services would remain robust, financial services would be bolstered by strengthening credit growth, and construction would be buoyed by a resilient property market and major projects already underway.

On inflation, Nomura maintained its 2026 core inflation forecast at an average of 2.1%, pencilling in an acceleration in coming months. It expects core inflation to rise to nearly 3% by August or September from 1.6% in June, driven by still-elevated energy prices and lagged adjustments in electricity tariffs raised substantially in July.

Nomura said the output gap was becoming more positive following its forecast revisions, making second-round effects from tariff and energy price adjustments more significant and likely keeping the MAS vigilant about inflation risks.