UOB’s Jester Koh notes that Singapore’s Q1 2026 GDP has been revised sharply upwards and that MTI has maintained its 2026 growth forecast of 2.0-4.0%. The bank raises its GDP forecast for 2026 to 3.2%, citing continued demand related to artificial intelligence and good indicators in the electronics industry. However, it highlights significant downside risks from supply disruptions in the Middle East and a weaker global situation.

Demand for artificial intelligence raises Singapore’s growth prospects

“Outlook – We raise our 2026 GDP growth forecast to 3.2% (from 2.5% previously; 2027: 2.1%), taking into account improved first quarter results and continued positive trends related to artificial intelligence, as evidenced by improvement in April electronics PMI (51.7; March: 51.4), driven by an increase in new orders (April: 52.3; March: 52.0) and order book (April: 51.7; March: 51.4).

“Meanwhile, South Korea’s first 20-day export data for May showed a 202% YoY increase in semiconductor exports, confirming that AI-related headwinds could continue to support growth in the second quarter and possibly the third quarter of 2026, likely fully offsetting related drag from disruptions in energy and petrochemical supplies resulting from the conflict in the Middle East.”

“Our forecast is subject to significant left tail risk, depending on the duration and extent of supply disruptions.”

“According to our baseline forecast, growth in 2026 is likely to be moderately above potential, with an estimated positive output gap of 0.6%.”

“Article 2.1 of the Singapore Economic Survey 1Q26 box highlighted that higher electricity prices, as well as significant disruptions in critical semiconductor inputs (helium, bromine and sulfur) could result in a slowdown in semiconductor production.”

(This article was created with the assist of an artificial intelligence tool and has been reviewed by an editor.)