Tech sector may account for larger share of Singapore’s GDP growth in 2026: MAS

SINGAPORE - Technology-related activities, like the manufacturing of electronics and IT equipment, could account for a greater share of Singapore’s economic growth in 2026 than in 2025, as demand soars for artificial intelligence (AI) chips used in data centres.

Non-technology segments of the economy, such as the aerospace and finance and insurance sectors, will also contribute materially to gross domestic product (GDP), the Monetary Authority of Singapore (MAS) said in its macroeconomic review released on Jan 29.

The central bank said: “Global AI tailwinds are expected to provide near-term support for Singapore’s trade-related sectors.

“While Singapore currently does not produce graphics processing units or high-bandwidth memory (HBM) chips for AI workloads – manufactured mostly in Taiwan and South Korea – it remains indirectly integrated with the AI ecosystem in the upstream phase.”

MAS cited the local production of memory chips essential for storing large datasets for AI models, as well as the manufacturing of servers, components and networking equipment supporting AI workloads.

It added that Singapore will continue to deepen its footing in the global AI value chain, with US memory chip giant Micron

scheduled to begin operating an HBM chip facility in Woodlands

in 2026.

MAS said: “More broadly, the technology-related segments could contribute a greater share to GDP growth this year compared with in 2025.”

Technology-related segments comprise the manufacturing of electronics, machinery and systems; the wholesale trade of electronic components, telecommunications equipment and computers; and IT and information services.

MAS also identified “pockets of strength” in non-technology segments of the economy that will make their mark on 2026 GDP growth.

Within manufacturing, MAS said the aerospace segment is expected to benefit from a sustained rise in maintenance, repair and overhaul orders, particularly for orders involving aircraft engines with more complex work scopes. Aerospace companies that are expanding and upgrading their facilities here are also expected to bolster the segment’s growth.

In services, MAS said the finance and insurance sector will likely be supported by generally accommodative macroeconomic and financial conditions.

MAS expects growth in loan volumes to stay resilient, minimally in the early months of 2026, before expanding at a more subdued pace, even as monetary easing cycles reach their end in most major economies.

On Jan 28, the US Federal Reserve left its key interest rate unchanged and signalled a more cautious approach to potential future adjustments.

MAS did not make changes to its setting for its Singapore dollar policy

on Jan 29, while it raised its forecasts for inflation.

Growth of the Singapore economy is expected to remain resilient in the short term, MAS said, even as it moderates from its strong showing of 4.8 per cent in 2025.

The economy is set to expand at a slower pace of 1 per cent to 3 per cent in 2026, according to Ministry of Trade and Industry projections.

From a sectoral perspective, MAS said the trade-related cluster, particularly manufacturing, and the modern services cluster should continue to underpin growth.

Meanwhile, the domestic-oriented cluster is expected to benefit from a strong pipeline of public and private construction projects.

MAS said overall GDP growth will be affected by whether the AI boom, which is driving investment into technology and advanced semiconductor chips, is sustained.

It said an acceleration in AI demand will especially support manufacturing output and trade-related services, boosting growth.

However, adverse events like geopolitical conflicts and the re-escalation of tariff actions could dampen investor sentiment globally and disrupt the AI investment cycle.

MAS said: “Beyond the near term, there is also the possibility of a sharp, synchronised correction in AI investment, driven by unrealised productivity gains and the inability to effectively monetise the application of AI technologies.

“As the industry continues to evolve, any shift in market sentiment or investment patterns could have significant implications for real economy growth prospects.”

Although the scale of AI-related capital expenditure is significant, MAS said much of the global building of data centres is being financed from the cash reserves of established technology companies.

But it noted that a subset of companies have raised their data centre expenditures at a significantly higher rate than cash flows, and become more reliant on debt financing, a move it said “warrants close monitoring”.

MAS also cited estimates showing that the capital expenditure of major technology companies, including Nvidia and Micron, will moderate from a 50 per cent expansion in 2025 to a firm pace of 30 per cent in 2026.

Demand for hardware and software could also come from the European Union and South Korea, which are ramping up investments to build data centres, MAS said.

It also pointed to new applications such as agentic AI, with the ability to understand natural language, reason and independently complete tasks on behalf of users.

MAS said the applications, which are powered by advanced semiconductors, are beginning to move from concept to deployment, boosting demand for chips.

It said manufacturers of traditional memory chips used in consumer electronics could also benefit from diverting resources to produce chips that support AI applications, of which there is a shortage.

The automotive semiconductor sector, meanwhile, will be supported by the move towards electrification and autonomous vehicles, MAS said.

Singapore’s electronics sector, which includes the semiconductor industry, was a key driver of GDP growth in 2025, buoyed by demand for AI-related products.