Singapore: Ai tailwinds offset conflict drag – UOB

UOB’s Jester Koh notes that Singapore’s 1Q26 GDP was sharply revised higher and that MTI kept its 2026 growth forecast at 2.0–4.0%. The bank raises its 2026 GDP forecast to 3.2%, citing sustained AI-related demand and strong electronics indicators. However, it highlights significant downside risks from Middle East-related supply disruptions and a weaker global backdrop.

AI demand lifts Singapore growth outlook

"Outlook – We raise our 2026 GDP growth forecast to 3.2% (from 2.5% prev; 2027F: 2.1%), incorporating the 1Q outperformance alongside sustained AI-related tailwinds, as evidenced by the improvement in the Apr electronics PMI (51.7; Mar: 51.4), driven by increases in the new orders (Apr: 52.3; Mar: 52.0) and order backlog (Apr: 51.7; Mar: 51.4) subindices."

"Meanwhile, South Korea’s first 20-day exports data for May showed a 202% y/y jump in semiconductor exports, confirming that AI-related tailwinds could continue to support growth in 2Q26 and possibly 3Q26, likely fully offsetting the associated drag from energy and petrochemical input supply disruptions stemming from the Middle East conflict."

"Our forecast is subject to significant left-tail risks, contingent on the duration and extent of the supply disruptions."

"Under our baseline forecast, growth is likely to run moderately above potential in 2026, with an estimated positive output gap of 0.6%."

"In the Economic Survey of Singapore 1Q26 Box Article 2.1, it was highlighted that higher electricity prices, as well as material disruptions to critical semiconductor inputs (helium, bromine, and sulfur), could result in a slowdown in semiconductor production."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)