AI investment slowdown could weigh on economic growth, Gan says

A sharp fall in AI-related spending could trigger corrections in global financial markets.

Singapore’s economy could face weaker growth if global investment in artificial intelligence (AI) infrastructure slows sharply, Deputy Prime Minister and Minister for Trade and Industry (Trade) Gan Kim Yong said.

AI-related activity is expected to contribute significantly to Singapore’s economic growth in both the near and longer term. Strong global investment in AI infrastructure has benefited outward-oriented sectors linked to related supply chains, including electronics, precision engineering, and machinery, equipment, and supplies wholesale trade.

“Downside risks to global AI capital expenditure include tighter financial conditions globally, which could make financing more costly for these investments,” Gan said.

A sudden drop in AI-related spending could also weaken investor confidence and trigger sharp corrections in global financial markets, with spillover effects on global economic activity, he added.

However, Singapore’s economy is diversified, with information and communications, professional services, real estate, and construction also expected to support GDP growth for the rest of 2026.

The government is also supporting businesses at different stages of AI readiness to adopt the technology and undertake AI-driven transformation to improve productivity and innovation. It is helping workers build the skills needed to work with AI, take on redesigned roles, and move into higher-value opportunities.

Around three in 10 firms have adopted AI, according to a recent Ministry of Manpower survey. Of these firms, about seven in 10 reported improvements in worker productivity. Gan said AI is complementing rather than replacing labour, with more firms redesigning existing roles and creating new AI-related jobs instead of reducing headcount.

A recent Ministry of Trade and Industry study also found that firms using AI recorded higher revenue and total employment, whilst those that deepened their AI capabilities saw greater gains.

Singapore is also building its AI research, engineering and commercialisation capabilities through National AI Missions in advanced manufacturing, financial services, connectivity, and healthcare announced at Budget 2026.

"The Government will continue to monitor the impact of AI on our economy, including enterprise-level AI adoption and its effects on firm performance," said Gan. "Through the National AI Council, we will coordinate our national AI efforts and ensure that AI-driven growth benefits the wider economy."