Written Answer · 2026-09-09 · Parliament 15
Sustainability of AI-led Economic Growth and Potential Risks in Event of Major Correction in Global AI Asset Valuations
Mr Liang Eng Hwa asked the Deputy Prime Minister and Minister for Trade and Industry whether the strong AI-led growth of the last four quarters can be sustained, and what risks Singapore faces if global AI investment and asset valuations correct sharply. Deputy Prime Minister Gan Kim Yong replied that global AI infrastructure investment has so far benefited outward-oriented sectors such as electronics, precision engineering and machinery wholesale; a slowdown in global AI capital expenditure would weigh on these sectors and could trigger a loss of investor confidence and sharp corrections in financial markets. He stressed that the economy is well diversified, with information and communications, professional services, real estate and construction expected to support growth for the rest of 2026. A Ministry of Manpower survey found about three in 10 firms had adopted AI, and about seven in 10 of those reported productivity gains. The Government is launching four National AI Missions and will coordinate and monitor AI efforts through the National AI Council.
Why it matters
The Government concedes that a sudden fall in global AI capital spending could trigger sharp market corrections, but points to a diversified economy and AI adoption by about three in 10 firms.
Key Points
- • Global capital investment in AI infrastructure has so far mainly benefited the electronics and precision engineering clusters in manufacturing, and the machinery, equipment and supplies segment of wholesale trade
- • Downside risks: tighter global financial conditions would raise financing costs; a sudden fall in AI capital spending could hit investor confidence, trigger sharp corrections in global financial markets and spill over to global economic activity
- • Information and communications, professional services, real estate and construction are expected to support GDP growth for the rest of 2026
- • Ministry of Manpower survey: about three in 10 firms have adopted AI, and about seven in 10 of those reported better worker productivity; an MTI study found firms using AI saw higher revenue and total employment
- • Budget 2026 announced National AI Missions in Advanced Manufacturing, Financial Services, Connectivity and Healthcare; Google DeepMind and OpenAI have set up research labs in Singapore
- • The Government will coordinate national AI efforts through the National AI Council and keep monitoring AI's impact on the economy and on firm performance
The Government acknowledges that a slowdown in global AI capital expenditure would weigh on AI-linked sectors and could trigger financial market corrections, but stresses that Singapore's economy is well diversified; it gave no quantified estimate of growth sensitivity to the AI cycle. Its response is to push AI adoption by firms and workers, launch National AI Missions and monitor through the National AI Council.
Questioner Mr Liang Eng Hwa is concerned whether the strong AI-led growth of the last four quarters can last, and what disruption a major correction in global AI investment and asset valuations would cause Singapore's economy.
In a written reply to Parliament the Government openly acknowledges the downside risk of the global AI capex cycle, but its answer rests on economic diversification and local AI adoption rather than any specific hedge against an AI bubble; using one identical reply for three MPs shows MTI has settled on a single line on this issue.
"Even as we keep a close watch on the AI-related risks, we would like to assure Members that Singapore's economy is well diversified."
Participants (2)
Original Text (English)
SPRS Hansard · Fetched: 2026-09-26
96 Mr Liang Eng Hwa asked the Deputy Prime Minister and Minister for Trade and Industry (Trade) (a) whether the strong AI-led economic growth seen in the last four quarters can be sustained; and (b) what are the potential risks and disruptions to the Singapore economy should there be a major correction in global AI-investment and asset valuations.
Mr Gan Kim Yong : My response will cover the question raised by Mr Liang Eng Hwa in today's Order Paper, as well as questions by Mr Edward Chia Bing Hui and Mr Saktiandi Supaat for subsequent sittings. If the Members are satisfied with the response, they may wish to withdraw their questions after this session. [ Please refer to " Impact of Global AI Capital Expenditure and Expansion on Singapore's Economic, Wage and Jobs Growth ", Official Report, 9 September 2026, Vol 96, Issue 36, Written Answers to Questions for Oral Answer not Answered by End of Question Time section. ]
Artificial intelligence (AI)-related activity is expected to contribute significantly to Singapore's economic growth in the near and longer term. In the near term, strong global capital investment in AI infrastructure has benefited outward-oriented sectors that are plugged into the related supply chains. These include the electronics and precision engineering clusters of the manufacturing sector, as well as the machinery, equipment and supplies segment of the wholesale trade sector.
A slowdown in global AI capital expenditure could weigh on growth in these AI-linked sectors. Downside risks to global AI capital expenditure include tighter financial conditions globally, which could make financing more costly for these investments. In turn, a sudden fall in global AI-related capital spending could trigger a loss of investor confidence, which could result in sharp corrections in global financial markets, with negative spillovers on global economic activity.
Even as we keep a close watch on the AI-related risks, we would like to assure Members that Singapore's economy is well diversified. Apart from the AI-linked sectors mentioned earlier, other sectors, such as information and communications, professional services, real estate and construction, are also expected to support gross domestic product growth for the rest of 2026.
For AI to propel our longer-term economic growth, we are supporting our enterprises, which are at different stages of readiness, to increase AI adoption and undertake AI-driven transformation to raise productivity and innovation. We are also supporting our workers to build the skills and confidence to work with AI, take on redesigned roles and move into new and higher-value opportunities.
We have observed early signs of progress. A recent Ministry of Manpower's survey found that around three in 10 firms had adopted AI. Of these, about seven in 10 reported improvements in worker productivity 1 . AI is also complementing, rather than replacing, labour, with more firms redesigning existing roles and creating new AI-related jobs, rather than reducing headcount. This is consistent with a recent Ministry of Trade and Industry's study, which found that firms using AI saw higher revenue and total employment, with those that deepened their AI capabilities seeing even higher gains 2 .
Beyond economy-wide AI adoption, we are building up our research, engineering and commercialisation capabilities. As announced at Budget 2026, we are launching National AI Missions in Advanced Manufacturing, Financial Services, Connectivity and Healthcare. We will work with industry and research partners to translate the AI research into deployable applications, drive AI-enabled transformation at scale and build new businesses. Alongside this, leading AI companies, including Google DeepMind and OpenAI, have also set up research labs in Singapore to anchor substantive research and engineering work here. These further strengthen our local research ecosystem, create high-quality jobs for Singaporeans and build on our broader investments in AI compute and talent.
The Government will continue to monitor the impact of AI on our economy, including enterprise-level AI adoption and its effects on firm performance. Through the National AI Council, we will coordinate our national AI efforts and ensure that AI-driven growth benefits the wider economy.