MAS: Singapore’s AI boom and tech sector to help local economy weather oil price shocks and new US tariffs

SINGAPORE: Singapore’s economy is set to stay on solid footing through the rest of 2026, thanks to the global artificial intelligence boom that continues to fuel demand for the country’s technology sector.

The Monetary Authority of Singapore (MAS) said technology-related industries are expanding faster than expected, helping to offset higher energy costs linked to the Middle East conflict and the impact of new United States import tariffs that took effect on July 24.

Singapore’s electronics industry has benefited from strong demand for memory chips, AI servers and related equipment. The infocomm and consumer electronics sectors also posted healthy growth as companies stepped up production to meet global demand.

MAS expects technology-related industries to contribute most of Singapore’s economic growth this year, up from about half of total growth in 2025, underscoring how the AI investment cycle is shaping the economy, Channel NewsAsia (CNA) reported (July 27).

AI strength offsets pressure from oil prices and tariffs

The report paints a picture of two economies moving in opposite directions.

Oil-related businesses have felt the strain from supply disruptions following the Middle East conflict. Petroleum refiners and petrochemical firms reduced production after feedstock supplies were affected, while exports of oil-related products declined.

At the same time, Singapore’s role as a regional trading hub helped soften the blow. Oil-related re-exports climbed, especially to Malaysia and Indonesia, as buyers sought alternative supply sources during the disruption. Air cargo also stayed busy, supported by shipments of high-tech products.

The latest US tariffs have also added another challenge. The Trump administration imposed a 12.5% tariff on Singapore exports to the United States, affecting about one-third of domestic shipments.

MAS said the immediate impact should stay manageable because Singapore exports to many markets and electronics products covered by the AI boom are exempt from the tariffs. Even so, it warned that future US trade measures could affect business confidence and investment.

Economic growth stays healthy, but risks haven’t disappeared

Singapore’s economy expanded 5.7% year on year in the second quarter, easing slightly from 6.3% in the previous quarter.

MAS expects economic activity to continue running above its long-term potential during 2026, supported by sustained demand across technology industries.

The central bank also offered a note of caution. It said investor excitement around AI could prove too optimistic if company earnings fail to keep pace with expectations.

Still, continued spending by major cloud computing companies and healthy AI-related earnings suggest the technology cycle still has room to run before those assumptions face a tougher test.

Jobs and wages expected to stay stable

The labour market also appears resilient. Resident employment continued to grow during the first quarter, with hiring led by wholesale trade, transport and storage.

Domestic sectors such as real estate, retail and food and beverage services also added workers. Companies became more cautious about hiring after conflict broke out in the Middle East, but MAS said overall job growth stayed firm.

Looking ahead, demand for workers should continue across trade-related industries, healthcare, education, social services and public administration. Wage growth is expected to return closer to historical norms, while technology-linked industries such as manufacturing and wholesale trade may continue offering stronger pay increases than other sectors.

Confidence is backed by data

MAS’s review suggests Singapore’s technology sector has become a key source of economic strength.

Strong global demand for AI chips, servers and digital infrastructure has helped offset weaker performance in oil-related industries affected by the Middle East conflict.

The central bank said this diversification has reduced the immediate impact of higher energy costs and new US tariffs, although it cautioned that geopolitical risks and further trade measures could still weigh on the outlook.

The bigger story may be how Singapore’s economy is changing. AI is no longer just a technology trend. It has become a major driver of exports, jobs and business activity, helping to cushion sectors facing weaker demand.

Higher energy prices, fresh trade barriers and geopolitical tensions could still weigh on the outlook. For now, though, the country’s diversified economy and strong technology sector are giving it a stronger buffer than many might have expected.

As Singapore continues to strengthen its skills, industries and ability to adapt, it has the best chance of weathering whatever comes next.