Singapore’s economy grows more than 5 percent amid AI boom

Key points

• Singapore's GDP grew 5.4 percent year-on-year from July to September, down from 6.2 percent in the second quarter.
• Manufacturing rose 7.5 percent and construction 8.8 percent, driven by AI-related demand.
• The central bank kept monetary policy unchanged, expecting AI demand to cool in 2027.

Singapore's economy grew more than 5 percent in the most recent quarter, extending an AI-driven boom that has made the city-state one of the fastest-growing advanced economies. Advance government estimates released on Wednesday showed gross domestic product rose 5.4 percent year-on-year between July and September, down from 6.2 percent in the second quarter.

The Ministry of Trade and Industry said manufacturing, dominated by the semiconductor industry, grew 7.5 percent. It said higher output in electronics, precision engineering, transport engineering and general manufacturing clusters drove growth, offsetting declines in chemicals and biomedical sectors. Construction, including AI-related investments such as data centres, expanded 8.8 percent.

Central bank holds policy

Despite the strong expansion, the Monetary Authority of Singapore left its monetary policy settings unchanged. The central bank, which manages policy through currency exchange rates rather than interest rates, said it expected core inflation to average 1.5 to 2.0 percent in 2026.

The central bank said global AI-driven growth is expected to ease in the latter half of next year from its current exceptional pace, while higher interest rates amid elevated inflation in advanced economies would weigh on final demand growth.

Global AI-driven growth is expected to ease in the latter half of next year from its current exceptional pace, while higher interest rates, amid elevated inflation in the advanced economies, would weigh on final demand growth.

— the Monetary Authority of Singapore

Semiconductor strength and outlook

Singapore accounts for roughly 10 percent of global semiconductor output and 20 percent of semiconductor equipment production, according to government figures. Yeow Hwee Chua, an assistant professor of economics at Nanyang Technological University, called the performance impressive for a high-income economy, especially given the uncertain global environment.

Chua said the global technology investment boom has been an important driver and that strong demand for electronics has supported manufacturing and related wholesale trade. The IMF expects Singapore's economy to grow 5 percent in 2026, faster than any other advanced economy except Taiwan. GDP grew 5 percent in 2025, its second straight year above 5 percent, the first such streak since 2010 and 2011.