Gulf Truce Collapse Poses Risk to Singapore's AI-Led Growth, Maybank Warns
Source: Singapore Business Review
Maybank Research has raised Singapore's 2026 GDP forecast to 4.6%, driven by an AI-led capital expenditure boom and a construction pipeline of megaprojects — but warns that a collapse of the US-Iran truce could restart the Gulf War and disrupt energy supplies, threatening the growth trajectory.
Singapore's economy is riding a powerful AI-driven wave that could push GDP growth to 4.6% in 2026, well above the government's official 2% to 4% forecast — but the rally faces a significant geopolitical risk, according to Maybank Research. The bank warned that a collapse of the short-lived US-Iran truce could restart the Gulf War and disrupt energy supplies, threatening the supply chains that underpin Singapore's export-driven AI boom.
The growth story is anchored on two massive tailwinds. US hyperscalers plan to raise capital expenditure by 77% in the second half of 2026, lifting Singapore's manufacturing output 13% year-on-year in May, driven by a 36% jump in electronics. Maybank forecasts non-oil domestic exports will grow 15% in 2026 — nearly quadrupling the official 2% to 4% guidance — citing major investments from Micron and Applied Materials that are deepening Singapore's role in the global AI supply chain. On the construction side, Maybank raised its 2026 growth forecast to 7%, pointing to a pipeline that includes Changi Terminal 5, the Tuas Megaport, the North-South Corridor, the Jurong Island expansion, and newly announced works at Changi Terminal 3 and Marina South.
However, the risks are real. A renewed Gulf conflict could disrupt energy flows, though Maybank noted that the sectors most directly exposed — petroleum, petrochemical, and land transport — make up just 2.1% of nominal GDP. Diversified energy sources, reserve inventories, and GasCo's forward LNG procurement have cushioned energy shocks to date. Meanwhile, safe-haven flows into foreign currency and Singapore dollar deposits have supported loan growth and banking liquidity. Maybank also flagged that high US inflation could trigger aggressive Federal Reserve tightening, translating into higher interest rates in Singapore.
The broader outlook remains positive if the geopolitical situation stabilises. Maybank expects the Monetary Authority of Singapore to hold its current modest S$NEER appreciation stance through 2027, forecasting core and headline inflation averaging 1.7% in 2026 and 1.6% in 2027, at the lower end of the MAS's 1.5% to 2.5% range. Its FX team forecasts the Singapore dollar holding at 1.285 against the US dollar by end-2026, similar to end-2025 levels. Maybank forecasts GDP easing to 3.1% in 2027, following 6% growth in the first quarter of 2026.
Why it matters for Singapore: The report captures a pivotal moment for the Singapore economy. AI-driven demand for memory chips, data centres, and semiconductor equipment is rewriting growth expectations higher, turning cautious official forecasts into conservative underestimates. But the same global supply chains that enable this boom also expose Singapore to geopolitical shock — a reminder that the city-state's AI-era prosperity remains tethered to international stability.