What's Up with Singapore? Economic Growth Now Takes a 'K' Shape

Singapore’s Channel News Asia (CNA) has produced its own analysis of the city-state’s economy. Amidst positive headline figures, it reports that not all Singaporeans are feeling the benefits.

Singapore’s gross domestic product (GDP) grew 5.7% year-on-year in the second quarter of 2026. The economy is expected to reach 4.5% to 5.5% growth this year. Non-oil domestic exports rose sharply while the artificial intelligence (AI) and technology sectors led growth. However, the domestic sector recorded weaker performance.

Sectors not linked to the global AI boom face pressure from geopolitical risks and weakening consumer sentiment due to inflationary pressures. This ultimately shows that Singapore’s economy is uneven, with the emergence of a ‘K-shaped growth’ pattern.

K-shaped growth describes a condition when different parts of the economy grow at different speeds or even move in opposite directions. Simply put, it means economic growth is not felt evenly across all sectors or groups in society.

‘The growth seen in the headline numbers is indeed strong,’ said Maybank Securities Singapore economist Brian Lee. ‘But beneath that it is quite uneven.’

Domestic and consumer-facing sectors in Singapore are weak. The retail and food and beverage (F&B) sectors, for example, face high rental and labour costs. On the other hand, consumers remain cautious about spending their money domestically. Some even prefer to spend their money abroad due to the strengthening Singapore dollar, which makes travel and shopping in the region relatively more attractive.

‘K-shaped growth is most visible in what Singapore’s factories produce and sell to overseas markets,’ said ANZ Head of Asia Research Khoon Goh. ‘This is most evident in Singapore’s non-oil domestic exports, where electronic export growth has surged while non-electronic products have not experienced the same.’

In July, electronic non-oil domestic exports surged 112% year-on-year. Meanwhile, non-electronic exports fell 2.3%.

Goh added that nearly 60% of growth in the first half of this year came from the manufacturing and logistics sectors. Meanwhile, the food and beverage sector contracted by 0.7%, while retail trade and non-professional services recorded more moderate growth.

Economists note that the best-performing sectors in recent quarters are not labour-intensive. Conversely, the sectors experiencing weakness employ a large share of the workforce.

Goh said the retail, hospitality, and non-financial services sectors account for 24% of Singapore’s economy. Unfortunately, these sectors employ only about half of the total workforce.

‘As a result, there is a feeling in society that strong GDP growth has not benefited workers, especially with changes in the labour market due to AI forcing companies to restructure to remain relevant,’ he said.

However, some other economists are cautious about applying the ‘K-shaped growth’ label to Singapore. They prefer to describe it as ‘strong, but relatively narrow and uneven’.

Standard Chartered economists Edward Lee and Jonathan Koh, for example, said in their report that households feel economic conditions mainly through job security, wages, and purchasing power, not through overall GDP figures.

‘Strong GDP growth from the trade sector has not produced a comparable increase in employment. This indicates that the external sector recovery has so far been relatively minimal in creating jobs,’ they said.

Singapore’s Minister for Trade and Industry (Energy and Industry) Tan See Leng said AI and automation allow companies to increase production with fewer workers.

‘Therefore, we can no longer assume that growth will automatically create the same number, type, or variety of jobs as before,’ he said.

Singapore’s advantage, according to him, will depend on how adaptive the country is. This includes proactive efforts to direct technology adoption and improve worker skills so they can fill new jobs as well as jobs that have undergone changes.

Meanwhile, Institute of Policy Studies senior research fellow Tab Ern Set said this condition must be addressed promptly. Uneven economic growth can create a ‘dual economy’.

This means the economy can be divided into two segments. First, knowledge workers who benefit from technological advancement and increased productivity. Second, lower-skilled workers who face weaker wage growth and the threat of job loss.

‘These two segments are separated by a gap, with low opportunities for mobility from the less advantaged group to the more advantaged group,’ he said.

In the long term, income differences can lead to wealth inequality. Especially if the AI-supported segment continues to grow while the other group faces low wages or job losses.

National University of Singapore Department of Communications and New Media assistant professor Jun Yu said individuals and organisations with more resources are generally in a better position to experiment with AI and turn it into productivity gains, influence, and income.

‘Those with fewer resources may experience this transition as something imposed upon them,’ he said.