Deputy Prime Minister Gan Kim Yong on Middle East conflict and Singapore’s next phase of growth

Key Concepts

• Economic Strategy Review (ESR): A government-led review to recalibrate Singapore’s economic strategy in response to a changing global landscape.
• AI Champions Program: An initiative to partner with select Singapore-based companies to deeply integrate AI into their operations.
• AI Missions: Sector-specific initiatives focused on applying AI to drive breakthrough transformations in key industries (advanced manufacturing, connectivity, finance, healthcare).
• AI Park (Kong AI): A dedicated hub at one-north to foster collaboration and innovation in AI.
• Trust-Based Services: Services leveraging Singapore’s reputation for reliability and security, including risk advisory, cybersecurity, and AI assurance.
• GDP Trend Growth: The projected average annual growth rate of Singapore’s economy, targeted between 2-3% over the next decade.
• Structural Forces: Long-term trends reshaping industries, including AI/automation and decarbonization.

Singapore’s Economic Reset: Navigating Uncertainty and Securing Future Growth

Introduction

Singapore’s economy grew by 5% last year, exceeding expectations despite global challenges. However, the nation is entering a new economic phase characterized by heightened geopolitical competition, rising protectionism, and a fragmented global order. The government has undertaken an Economic Strategy Review (ESR) to address these shifts and secure future growth, aiming for a GDP trend growth of 2-3% over the next decade.

I. The Evolving Global Landscape & Immediate Challenges

The global economic rules that underpinned Singapore’s past success are changing. Recent developments illustrate this volatility: the US Supreme Court’s decision on reciprocal tariffs, followed by the imposition of a new 10% (potentially rising to 15%) Section 122 tariff by the US administration, create significant uncertainty for businesses. Furthermore, escalating conflict in the Middle East, specifically the closure of the Straits of Hormus – a critical shipping route for crude oil and LNG – poses a threat to global energy prices and, consequently, Singapore’s economy. The government is actively monitoring these developments and will reassess GDP and inflation forecasts as needed, working with the Singapore Economic Resilience Task Force to support businesses and workers.

II. Major Structural Forces & Long-Term Challenges

Beyond immediate geopolitical risks, major structural forces are reshaping industries. AI and automation are transforming value creation and work organization, while the global push for decarbonization is altering industrial processes and investment patterns. Coupled with Singapore’s demographic constraints (discussed previously), sustaining growth and creating good jobs will be increasingly challenging.

III. Five Strategic Thrusts for Future Growth

The ESR outlines five strategic thrusts to navigate these challenges and capitalize on opportunities:

1. Leadership in Key Growth Sectors: Singapore will focus on deepening its leadership in advanced manufacturing (semiconductors, medical products, specialty chemicals, aerospace) and modern services, while simultaneously exploring new areas like quantum technologies, decarbonization technologies, and space-related industries. Investments in AI, automation, and digital technologies will be crucial to enhance productivity, quality, and resilience in manufacturing. R&D resources will be allocated to accelerate innovation and the transition from lab to market. Adoption of low-carbon technologies will ensure competitiveness in a decarbonizing world.

2. A Dynamic Enterprise Ecosystem: Multinational Corporations (MNCs) will remain a core pillar, with continued efforts to anchor high-value activities like R&D and regional headquarters. However, the next phase of growth will increasingly rely on high-growth companies with the ambition to become industry leaders. The government will support these companies with access to markets, regulatory facilitation, and facilities. Workto, an enterprise software firm with 10-fold revenue growth in the Asia-Pacific region, is cited as an example of a company Singapore aims to attract and support. The goal is to make Singapore not just a landing pad, but a launching pad for global companies. The startup community will also be nurtured.

3. AI Leadership & an AI-Empowered Economy: Establishing Singapore as an AI leader is a critical enabler. The government aims to empower companies to harness AI across all operations, from process redesign to job transformation. Over 60 companies have already established AI centers of excellence. A “Champions of AI” program will be launched to partner with ambitious companies to deeply integrate AI, including workforce training and AI transformation projects. DBS Bank is presented as a successful example, demonstrating how AI can enhance business value, strengthen the workforce (e.g., retraining customer service officers into AI agent monitoring managers), and generate significant economic value (approximately $1 billion in 2025).

4. Proactive Business Transitions: Businesses will inevitably need to adapt and restructure in response to changing market conditions. The government will work with trade associations, chambers, enterprises, and the labor movement to support firms through these transitions, helping them assess options, restructure responsibly, and explore new growth opportunities, including overseas expansion.

5. Safeguarding International Economic Space: Singapore will continue to deepen and diversify its economic links with trading partners, supporting companies in expanding internationally, particularly in developing and emerging markets.

IV. Key Initiatives & Infrastructure

• AI Missions: Sector-specific initiatives (advanced manufacturing, connectivity, finance, healthcare) will focus on applying AI to solve specific industry challenges, building full-stack ecosystems including data sets, computing resources, and regulatory sandboxes.
• AI Park (Kong AI): A dedicated hub at one-north will foster collaboration between talent, problem owners, researchers, and resources, serving as a center of gravity for AI excellence.
• EDB Support: Enterprise Singapore (EDB) will step up efforts to identify and anchor high-growth companies, providing bespoke support for market access, regulatory facilitation, and facilities.

Conclusion

Singapore faces a more complex and uncertain economic future. The ESR outlines a comprehensive strategy to navigate these challenges by building on existing strengths, embracing new opportunities, harnessing technology, and supporting its people through change. Success hinges on agility, innovation, and a commitment to investing in its workforce. The government’s strategy aims to ensure that economic growth translates into good jobs for Singaporeans and a stake in the nation’s future. By proactively planning, acting decisively, and remaining united, Singapore aims not just to navigate change, but to shape it.