Singapore's economy grows 6% on AI chip demand, offsetting Middle East war impact
Singapore's economy expanded 6 percent year-on-year in the first quarter, driven by surging demand for artificial intelligence chips used in data centers worldwide, the government said Monday.
The city-state's manufacturing sector benefited from increased production of memory chips and server components essential for powering AI tools. Exports rose 9.6 percent compared to the same quarter last year, with electronics leading the gains.
The trade ministry maintained its 2026 growth forecast of 2.0 to 4.0 percent despite headwinds from the Middle East conflict. The ministry warned that "downside risks to Singapore's economic outlook have risen significantly" and said it would adjust projections if global conditions deteriorate.
What drove the growth
Strong performance across wholesale trade, manufacturing, and finance and insurance sectors powered the first-quarter results. The wholesale trade segment saw growth in machinery, equipment, and supplies tied to AI demand.
Governments and tech companies are investing hundreds of billions of dollars into data centers that power chatbots, image generators, and AI agents. That spending has sustained demand for the components Singapore produces.
"AI-related demand has remained strong and should continue to support the growth of regional economies throughout the year," the trade ministry said.
Offsetting economic headwinds
The Middle East conflict has disrupted oil supplies and other resources like fertilizer and aluminum, spiking prices and dampening consumer spending. Closure of the Strait of Hormuz has hit Singapore's oil-refining sector, a major part of its economy.
AI chip demand has more than compensated for those losses. The electronics and precision engineering clusters within manufacturing saw particular strength.
As an export-oriented economy with a small domestic market, Singapore typically signals broader trends in international trade. The first-quarter results suggest AI data center expansion is outpacing geopolitical disruptions for now.
Your membership also unlocks:
