Singapore's gross domestic product expanded 5.4 percent in the July-to-September period, down from 6.2 percent growth in the second quarter, the Ministry of Trade and Industry reported on Wednesday.
Manufacturing, dominated by the city-state's semiconductor industry, grew 7.5 percent. Increased output in electronics, precision engineering, transport engineering and general manufacturing clusters drove the gains, offsetting declines in the chemicals and biomedical sectors, the ministry said.
Construction, including AI-related investments such as data centres, expanded 8.8 percent.
Singapore accounts for roughly 10 percent of global semiconductor output and 20 percent of semiconductor equipment production, according to government figures. The sector has helped the economy weather choppy conditions including the energy shock prompted by the US-Israel war on Iran.
Yeow Hwee Chua, an assistant professor of economics at Nanyang Technological University, described the performance as "impressive for a high-income economy, especially given the uncertain global environment."
"The global technology investment boom has been an important driver," Chua told Al Jazeera. "Strong demand for electronics has supported manufacturing and related wholesale trade, illustrating how Singapore benefits from its position in global supply chains."
The Monetary Authority of Singapore, which manages policy through currency exchange rates rather than interest rates, left its settings unchanged in its latest announcement on Wednesday. It said core inflation was expected to average 1.5 to 2.0 percent in 2026.
"Global AI-driven growth is expected to ease in the latter half of next year from its current exceptional pace, while higher interest rates, amid elevated inflation in the advanced economies, would weigh on final demand growth," the central bank said in a statement.
The International Monetary Fund forecasts Singapore's economy will grow 5 percent in 2026, faster than any other advanced economy except Taiwan. The city-state grew 5 percent in 2025, its second consecutive year of above-5-percent growth, the first such streak since 2010-2011.