SINGAPORE (July 28): Singapore's economic growth should remain firm in the second half of 2026 although a major uncertainty is the sustainability of the AI investment boom, the head of its central bank said on Tuesday.

Monetary Authority of Singapore managing director Chia Der Jiun, speaking at the release of the central bank's annual report, said the Middle East conflict also posed risks, but for now global AI-related demand is "likely to continue to provide a meaningful boost" to the city-state while other sectors maintain a pace of growth close to trend.

The annual report for the year ending March 2026 was released a day after the MAS tightened its policy settings for a second consecutive meeting, citing inflation risks.

Chia flagged the AI investment boom as "a major uncertainty" given how AI-driven electronics exports now account for more than 70% of Asia's export growth so far in 2026, up from 46% in 2024.

A lengthy boom could lead to inflation, while a pullback in AI investments "could sharply weaken global growth through a fall in business investment and semiconductor demand and negative wealth effects," he said.

"Markets will increasingly be looking to commercial revenue growth to justify the financing risks. Revenue growth will in turn depend on early signs of AI productivity gains at the firm level broadening across the economy and a deepening of transformative applications," said Chia.

A second risk to the MAS' outlook was a prolonged Middle East conflict, Chia said.

"While not our base case, we cannot discount the risk of oil prices moving sharply higher and shortages of oil and downstream products worsening."

Earlier this month, Singapore reported preliminary growth of 5.7% in the second quarter from a year earlier, driven by AI-related demand. The trade ministry has forecast full-year growth in 2026 at 2% to 4%.

Annual inflation was 1.6% in June, and the central bank expects it to pick up from this month and stay elevated for the first half of next year. MAS ⁠expects both core and headline inflation to average 1.5% to 2.5% in 2026.

Chia told the media briefing that the consecutive monetary policy tightenings this year are expected to lean effectively against the incoming inflationary pressures.

MAS chief economist Edward Robinson said that monetary policy was not on a pre-set path, and said he would describe current settings as "mildly restrictive".

Chia said the MAS made a net profit of S$20 billion (US$15.5 billion or RM63.3 billion) in the 2025/26 financial year. It will contribute S$1 billion to the government's consolidated fund.

Assets under management in Singapore's financial sector grew 10.1% year-on-year to reach S$6.7 trillion at the end of 2025, the annual report showed.

"The outlook ahead is uncertain, with continued energy market disruptions, rising inflation and high equity market valuations posing risks to future investment returns," Chia said.

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