GDP forecast raised to 4.5%-5.5% on global AI capex surge

Further acceleration in AI-related capital expenditure raises growth prospects.

Singapore’s full-year GDP forecast has been upgraded to 4.5% to 5.5%, up from the previous 2% to 4% growth estimate, the Ministry of Trade and Industry (MTI) said.

MTI noted the better-than-expected performance of the Singapore economy in the first half of the year, and the acceleration in global AI-related capital expenditure, as reasons for the improved outlook.

“For the rest of the year, a further acceleration in AI-related capital expenditure is expected to lift the growth prospects of economies plugged into the global technology value chain,” the MTI wrote.

Singapore’s economy grew 5.9% year on year in Q2, extending the 6.3% expansion the previous quarter. Compared to Q1, the economy grew by 1.4% in Q2. Overall, H1 GDP growth is 6.1%.

Strong performance in manufacturing, wholesale trade, and finance & insurance sectors drove the GDP growth in Q2, the MTI said.

Downside risks include further escalation and broadening of the Middle East conflict, which could trigger new spikes in the prices of energy commodities. Additional US tariff actions and uncertainties surrounding tariffs could weigh on business and household sentiments as well, the MTI said.

Sudden risk-off sentiments in the financial markets regarding global AI-related capital spending could trigger sharp corrections in these markets.

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