AI productivity gains could help offset tighter labour supply. 

Singapore’s economy is expected to expand by an average of 2.7% annually from 2026 to 2035, below its 5.2% growth in 2024 and 2025, as demographic pressures weigh on a mature market.

Artificial intelligence (AI)-driven productivity gains are expected to help offset the tighter labour supply, according to a report by Bain & Company, DBS Bank, and Vriens & Partners.

The country was identified as the most resilient of Southeast Asia’s six largest economies covered in the report.

“Singapore is maximising its ‘stability premium’ amid heightened global volatility,” Hans Vriens, founder and managing partner of Vriens & Partners, said.

The report pointed out that its resilience is supported by its safe-haven status, deep financial markets, and fiscal buffers.

In a more favourable environment, the country could benefit from stronger regional capital flows, AI adoption and advanced manufacturing activity, it added.

Separately, Singapore has captured more than 60% of total regional foreign direct investment (FDI), supported by its roles in finance, semiconductors and biomedical manufacturing.

Net FDI inflows reached about $193.3b (US$151b) in 2025, compared with an annual average of about $152.3b (US$119b) from 2020 to 2024.

The market is also the largest source of FDI into Indonesia, Malaysia, Thailand and Vietnam, the report said.

Singapore’s imports reached about $638.7b (US$499b) in 2025, up from an annual average of about $531.2b (US$415b) from 2020 to 2024.

On domestic investment, gross fixed capital formation stood at about $170.2b (US$133b) in 2025. The report attributed the increase to public-led construction and semiconductor expansion.

However, energy dependence remains another constraint. The report said the market will need to diversify its energy supply as power-intensive activities, including AI and advanced manufacturing, expand.

Wider AI adoption was also identified as a key issue for Singapore.

“The priority now is converting AI leadership into broad productivity gains across mid-market firms,” the report added.