Singapore firms adopting artificial intelligence (AI) are seeing increases in revenue and employment, although the technology has yet to deliver statistically significant gains in productivity or profits within four years of adoption, a new study found on Tuesday.
The study, which developed a firm-level measure of AI use based on data from online job postings, linked the measure to administrative firm-level data to examine the characteristics and performance of AI-using firms, the Ministry of Trade and Industry said in a report.
It found that AI adoption tends to build on firms’ previous investments in foundational and complementary digital technologies, rather than representing a stand-alone technological leap.
Firms in digital- and data-intensive sectors, including information and communications, electronics, professional services, and finance and insurance, were more likely to use AI. Larger firms were also more likely to adopt AI, even after accounting for differences in sector and firm age.
Meanwhile, First-time AI adoption was associated with increases in firms’ total employment and revenue, with these gains continuing to rise as firms deepen their AI capabilities.
The study said the gains could reflect AI’s potential to reduce costs, enable new products and support higher output. The increase in employment also suggests that any worker separations resulting from AI adoption were outweighed by new hiring.
AI may also automate specific tasks rather than entire jobs, allowing workers to focus on remaining or newly created complementary tasks, it said.
However, firms did not record statistically significant increases in productivity or profits within four years of their first AI adoption.
The study said this could reflect the time needed for firms to make complementary investments before the full benefits of AI materialize, similar to the experience of earlier transformative technologies such as the internet.
The employment impact also varied across worker groups. Initial employment gains were concentrated among local higher earners and mid-career workers, as well as skilled foreign professionals.
As firms deepened their AI capabilities, however, employment gains among local workers broadened across different wage and age groups.
The impact of AI adoption also varied by sector and firm size. Firms in finance and insurance, wholesale trade, and information and communications recorded larger average revenue gains, while micro and medium-sized firms also saw relatively stronger revenue benefits.
The findings point to several policy priorities, including strengthening firms’ foundational digital capabilities to support AI adoption and tailoring AI support according to sector and company size.
The study said policymakers could identify sector-specific AI applications with higher potential returns, while smaller firms may require greater support to build the internal capabilities needed to integrate AI effectively.
Workforce policies should also focus on job transformation and worker training, enabling employees to move towards tasks that complement AI as some existing tasks become automated.
The study cautioned that its findings cover firms’ AI use only up to 2024 and therefore capture the early effects of AI diffusion. They do not reflect more recent advances such as agentic AI or broader enterprise adoption.
Future research could examine the impact of specific AI applications using more recent data that better captures technological advances and emerging patterns of adoption, the study said.
MTI has also upgraded Singapore’s gross domestic product (GDP) growth forecast for 2026 to 4.5 percent to 5.5 percent, from 2 percent to 4 percent. This reflects the better-than-expected performance of the
Singapore economy in the first half of the year, as well as an improved outlook for the rest of the year due to the acceleration in global AI-related capital expenditure.
In the second quarter of 2026, the Singapore economy grew by 5.9 percent on a year-on-year basis, easing from the 6.3 percent expansion in the previous quarter.
On a quarter-on-quarter seasonally-adjusted basis, the economy expanded by 1.4 percent, extending the 1.2 per cent growth in the first quarter.
For the first half of 2026, Singapore’s GDP growth came in at 6.1 percent year-on-year.
On a year-on-year basis, GDP growth in the second quarter was driven by the strong performance of the manufacturing, wholesale trade and finance and insurance sectors. In particular, robust global AI-related demand boosted growth in the electronics and precision engineering clusters of the manufacturing sector, as well as the machinery, equipment & supplies segment of the wholesale trade sector.
It is noted that in May, MTI maintained Singapore’s GDP growth forecast for 2026 at 2 percent to 4 percent, based on the expectation that global AI-related demand would cushion the impact of the US-Israel-Iran conflict on the global economy.
Since then, the global AI investment boom has been stronger than expected. This has provided significant tailwinds to AI-related production and exports globally.
For the rest of the year, a further acceleration in AI-related capital expenditure is expected to lift the growth prospects of economies plugged into the global technology value chain, said MTI.
According to the ministry , the acceleration in global AI-related capital expenditure should boost growth in the electronics and precision engineering clusters of the manufacturing sector.
Notably, demand for AI-related semiconductors (e.g., networking and memory chips) from the data center end-market is expected to remain strong amidst the rapid rollout of agentic AI across industries, while capacity expansions by semiconductor firms will raise demand for semiconductor equipment.
Strong activity in these clusters will generate positive spillovers to the machinery, equipment and supplies segment of the wholesale trade sector, it added.
Merck expands biosafety testing laboratory in Singapore to strengthen services across Asia Pacific