Singapore growth poised for boost as pace in tech productivity surges: DBS

[SINGAPORE] The Republic may be undergoing an uplift in growth potential, fuelled by a revival in productivity and record-breaking investment in high-tech sectors, a DBS macro research report released on Monday (Feb 23) said.

This optimistic outlook follows two years of robust growth at 5.3 per cent and 5 per cent in 2024 and 2025, respectively, with expectations for another strong showing in 2026.

Singapore’s recent performance suggests the “ingredients are in place” for a productivity-led uplift in growth performance, analysts from DBS wrote.

ICT sector powers productivity pivot

Analysts attributed this upshift in gross domestic product mainly to a significant turnaround in total factor productivity (TFP), which measures the effects of “technological progress and changes in the organisation of production”.

This means that an increase in productivity can occur with the same or less inputs. 

After a “lacklustre period” averaging 0.7 per cent annually in the 15 years prior to the pandemic, TFP has surged to an average of 2.8 per cent over the last two years. This shift accounted for more than half the growth outcome in 2024 and 2025.

“Given the buoyant trend in investments and ongoing technology adoption, especially related to artificial intelligence, we are hopeful that the trend would continue in the coming years,” analysts said.

“While no general uptrend in labour productivity is visible, one sector is showing signs of promise. Over the past few years, productivity in the information and communications technology sector has picked up discernibly,” they added. 

Record investment momentum

Complementing these productivity gains is Singapore’s rising investment momentum. 

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“Singapore... has a track record of mobilising capital efficiently with a long-term investment horizon,” the analysts said. 

Investment commitments attracted by the Economic Development Board (EDB) reached S$14.2 billion in 2025.

While the electronics sector typically dominates, last year saw a record investment spike in the biomedical manufacturing sector, the report noted.

Still, the electronics sector continues to benefit from “robust artificial intelligence (AI)-related demand for memory chips and server-related products”, with electronics domestic exports surging 56.1 per cent in January 2026.

Foreign direct investment (FDI) flows also are currently running at twice the amount received a decade ago, with 2024 flows hitting S$192 billion.

“Substantial amounts are being directed to Singapore’s manufacturing sector, especially electronics and pharmaceuticals. The key driver of FDI is however finance and insurance,” the analysts noted. 

“”Singapore’s ability to attract chunky investments in cutting-edge sectors remains undiminished,” the report read, “which bodes well for the medium-term economic growth outlook”.

“Striking claim”

DBS analysts acknowledged that asserting a structural upshift for an economy already possessing “one of the highest per capita income levels in the world” is a “striking claim”. 

Yet, with the “emerging supportive evidence”, an uplift in growth potential would be a testament to long-term policy making in improving the capital stock, human capital, and harnessing technological progress, they said.