Singapore: Economic growth slows in the second quarter of 2026
GDP growth beats expectations: According to an advance estimate, Singapore’s GDP grew 5.7% on a year-on-year basis in Q2, following upwardly revised 6.3% growth in the previous quarter. The figure was above market expectations.
On a seasonally adjusted quarter-on-quarter basis, the economy expanded 1.1% in Q2, following 1.3% growth in the previous quarter.
AI-related manufacturing drives growth: Compared to the prior quarter’s data, readings in Q2 softened for the services sector (+4.6% in annual terms vs +6.2% in Q1) and the construction sector (+6.2% vs +12.9% in Q1). In contrast, the reading for the manufacturing sector improved in Q2 (+12.2% vs +8.0% in Q1).
Manufacturing expanded at the strongest pace in nearly five years as the electronics cycle remained buoyant, supported by strong AI-related global demand and Singapore’s increasing role as a neutral AI hub amid U.S.-China rivalry. Still, the Iran energy shock likely weighed on consumer demand and tourism: Domestic trade and activity in the hospitality sector decelerated from Q1. The GDP by expenditure breakdown will be published in August, but the available figures suggest that the economy is becoming more dependent on electronics and other externally oriented industries, with domestic demand losing steam.
Panelist insight: EIU analysts commented:
“We expect AI-related semiconductor demand to continue supporting manufacturing output and export growth during the second half of 2026, although headline GDP growth will slow as favorable base effects fade, and weakness in chemicals and domestically oriented services offsets some of the boost. Construction activity should remain supportive, underpinned by a strong pipeline of public- and private-sector projects, although growth will moderate from the unusually rapid pace recorded earlier in the year.”
Jester Koh, economist at United Overseas Bank, said:
“We raise our 2026 GDP growth forecast further following the 1H26 GDP growth outperformance (6.0%). Recent indicators also suggest that AI-related tailwinds could remain supportive through 3Q26. […] We see left-tail risks to our baseline forecast. A meaningful re-escalation in the Middle East conflict, leading to a renewed surge in energy and oil prices, could prompt central banks globally to tighten monetary policy further. If accompanied by a selloff in AI-related equities amid stretched valuations, firms may delay or cancel capex plans. This could, in turn, lead to an unwinding of the electronics cycle and weigh materially on growth.”