Singapore’s economy grew 5% in 2025, data released on February 10 showed, beating an earlier estimate of 4.8% growth, driven by a manufacturing boost from global demand for artificial intelligence, even as the city-state prepares for challenges posed by potential disruption from the technology.

Last year’s result fell below the 5.3% expansion recorded in 2024. On February 10, officials upgraded the growth forecast this year to a range of 2–4%, up from 1–3% previously.

The Southeast Asian trading hub’s gross domestic product expanded 6.9% in the October-December quarter versus a year earlier, higher than the 5.7% estimate released last month, according to government data.

“The global economy has outperformed expectations, with most major economies turning in stronger-than-expected growth in the fourth quarter of 2025,” the Ministry of Trade and Industry said in a statement on February 10. “Global trade activity remained resilient despite the US tariffs, likely reflecting effective US tariff rates that were lower than the announced headline rates.”

During the three months through December, the export-driven manufacturing sector expanded 18.8% compared with a year earlier, while output in the more domestically oriented services sector grew 4.8%.

Electronics exports jumped 24.9% on the year in December, UOB Global Economics and Markets Research pointed out in a January note, owing to “robust export growth” in telecommunications equipment and integrated circuits.

Singapore has received a trade bump from electronics and non-electronics shipments, amid rising demand for AI hardware overseas. But the city-state is also bracing for disruption from the global AI wave. Authorities are keen to position the country as a regional leader in embracing the tech, while also aware that it could displace many jobs domestically as companies increasingly lean on software to drive business rather than workers.

Singapore has earmarked additional investment of more than SGD 1 billion (or about USD 790 million) over the five years to 2030, under a national AI R&D plan, authorities said last month. The government plans to strengthen the city-state’s position as an AI research hub by scaling up research efforts and taking on challenges within the field. The funds will be used to establish research centers to advance the field in priority areas, such as emerging AI methodologies and general-purpose AI, and to develop a pipeline of talent by partnering with researchers and institutions.

“We will strengthen our talent base through nurturing AI research expertise at all levels,” the country’s minister for digital development and information, Josephine Teo, said in January. “We will enhance scholarships and research opportunities for our students, so they will be well placed for competitive PhD, postdocs, and faculty openings in top institutions.”

“Semiconductor manufacturers set up greenfield plants and expanded existing facilities to serve strong global demand for AI-related chip, server, and server-related products, with these investments having positive spillover effects on the precision engineering sector,” Singapore’s Economic Development Board, an agency tasked with drawing investments into the city-state, said on February 10.

Of the SGD 14.2 billion (or about USD 11 billion) in fixed-asset investment commitments that the city-state received in 2025, about 85% came from manufacturing-related projects, the board said in an update.

At a briefing on February 10, Augustin Lee, permanent secretary at the trade ministry, told reporters that “stronger-than-expected growth momentum” seen in the last quarter of 2025 is projected to carry into this year.

“Apart from the AI investment boom, which is expected to be sustained in 2026, expansionary fiscal policies in the advanced economies, as well as accommodative global financial conditions, should also support global growth,” he said. “A stronger-than-projected upswing in the AI investment cycle could provide a greater boost to electronics demand and drive further gains in equity markets.”

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.