Singapore Economics: Reiterating Our Jul Steepening Call On Above-trend 2Q26 GDP Growth

Research evidence excerpt

Singapore Economics: Reiterating Our Jul Steepening Call On Above-trend 2Q26 GDP Growth

Singapore Economics

14 July 2026 Citi Research

We raise our 2026E GDP forecast to 4.8% (prev: 4.5%), with upside risks – With

1H26 growth of 6% YoY, 2H26E growth will have to slow sharply to 3.6% YoY for our

forecast to be realized. Sequentially, this would imply a sharp sequential slowdown

to below-trend rates of just 0% QoQ SA in 2H26 on average, from 1.2% in 1H26.

We incorporate some slowing in electronics export momentum from well above-

trend levels in 1H26, consistent with the directional signals from our Electronics

Leading Indicator (ELI), although cushioned by partial reversal of headwinds related

to the Straits of Hormuz (SoH) closure on petrochemicals, refinery and sea

transport sectors into tailwinds in 3Q26. Nonetheless, we are cognizant of the

possibility that AI-related tailwinds could be stronger than we expect, with gentler

moderation in electronics NODX momentum than we currently assume. Moreover,

even if NODX growth moderates in 2H26, implied inventory drawdowns could still

keep industrial production relatively well supported. Capacity additions in HBM

and possibly NAND flash memory in 2H26 could further support production and

exports. Importantly, we also note that AI-related tailwinds to manufacturing have

broadened beyond the semiconductor and electronics, and into the precision

engineering sector which had previously lagged. Thus, Singapore’s headline GDP

growth could be more leveraged to the AI capex buildout than we have expected.

Risks to our upgraded forecast remain to the upside.

We now expect MTI to raise its forecasts to 4-5% or higher in Aug, still implying

a wider 2026 positive output gap than previously expected - With the ceiling of