By Amanda Lee

SINGAPORE--Experts surveyed by Singapore's central bank have trimmed their growth forecast for the year and raised inflation expectations, warning of geopolitical risks and the danger of an "artificial-intelligence bubble."

Economists and analysts now expect gross domestic product to expand 3.5%, the Monetary Authority of Singapore's June survey showed. That's slightly lower than the prior estimate of 3.6% and well below the 5.0% growth recorded in 2025.

Singapore's economy has held up better than expected at the start of 2026, even as the outlook deteriorated due to the fallout from the Middle East conflict, which threatens to drive up costs and slow growth.

The latest truce between the U.S. and Iran has raised hopes of a resumption of energy supplies via the Strait of Hormuz, but uncertainty remains high and it will take time for markets to recover from the shock. Re-escalation remains a risk.

In the MAS survey, respondents cited an escalation or prolonging of Middle East tensions as posing the biggest downside to Singapore's economic outlook.

Inflation projections were raised, with headline and core prints for 2026 now estimated at 2.3% and 2.0%, respectively, up from 1.5% each previously.

Against that backdrop, 38% of respondents expect the central bank to tighten policy settings in July.

The experts noted a brighter outlook for the manufacturing sector, which contributes around 20% of Singapore's GDP, projecting growth at 5.0% this year versus the 4.3% forecast earlier. However, that too would represent a slowdown from last year.

AI was also a major factor for the economists, who see a two-sided risk from the technology.

Singapore has been one of the beneficiaries of the rapid buildout of AI infrastructure and demand for related equipment.

Respondents flagged the risk of the AI bubble bursting and AI spending slowing, which would have spillovers to financial markets. On the other hand, a sustained AI-led tech cycle upturn presents an upside risk to Singapore's economic outlook.

Despite the city-state still facing U.S. tariffs, the survey respondents expressed a positive view on exports, seeing a 6.1% rise in annual shipments of non-oil domestic goods. That compared with the 4.5% projection in March, and government agency Enterprise Singapore's forecast 3% to 5%.

They maintained their 2027 GDP growth forecast for Singapore at 2.5%.

The MAS survey reflects the views of 22 respondents. It doesn't represent the central bank's views or forecasts.


Write to Amanda Lee at amanda.lee@wsj.com


(END) Dow Jones Newswires

06-17-26 0014ET