Singapore’s economy grew more than 5 percent in the most recent quarter, continuing an AI-fuelled boom that has made the city-state one of the fastest-growing advanced economies.

Gross domestic product (GDP) grew 5.4 percent year-on-year between July and September, down from a 6.2 percent expansion in the second quarter, according to advance government estimates released on Wednesday.

Manufacturing, which is dominated by the city-state’s semiconductor industry, grew 7.5 percent, according to the estimates from the Ministry of Trade and Industry.

Increased output in “electronics, precision engineering, transport engineering and general manufacturing clusters” drove growth, the ministry said, offsetting declines in the chemicals and biomedical sectors.

Construction, including AI-related investments such as data centres, expanded 8.8 per cent, according to the figures.

Despite the heady expansion, Singapore’s central bank left its monetary policy settings untouched in its latest announcement on Wednesday, citing expectations that AI demand will cool in 2027.

The Monetary Authority of Singapore, which manages monetary policy through currency exchange rates rather than interest rates, said it expected core inflation to average 1.5–2.0 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.

Singapore is a major global player in the booming chip sector, a position that has helped it weather choppy economic conditions, including the energy shock prompted by the US-Israel war on Iran.

The Southeast Asian city-state accounts for roughly 10 percent of global semiconductor output and 20 percent of semiconductor equipment production, according to government figures.

Yeow Hwee Chua, an assistant professor of economics at Nanyang Technological University, described Singapore’s economic 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,” he said.

Singapore’s economy is expected to grow 5 percent in 2026, according to the IMF’s latest economic forecast, faster than any other advanced economy except Taiwan.

The city-state’s GDP grew 5 percent in 2025, its second straight year of growth above 5 percent – the first such streak since 2010 and 2011.