The digital economy has maintained a 17.7% share of GDP in Singapore, where small and midsize businesses (SMBs) as well as artificial intelligence (AI) are predicted to play key roles in fueling growth.
The nation’s digital economy contributed SG$113 billion ($85.31 billion) to last year’s GDP, accounting for SG$1 of every SG$6, according to the latest stats released by industry regulator Infocomm Media Development Authority (IMDA).
Clocking a compound annual growth rate of 11.2% between 2018 and 2023, Singapore’s digital economy almost doubled the nominal GDP growth rate of 5.8% for its total economy, IMDA said. Its digital economy comprises the information and communications sector, which contributed about one-third of the pie, while non-information and communications sectors accounted for the remaining two-thirds.
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Some 94.6% of SMBs have adopted digital technologies in more than one of six key areas, such as AI, cybersecurity, cloud, and data analytics. Those that did so under the government’s Productivity Solutions Grant said they saw cost savings of 50% on average between 2018 and 2023, IMDA noted.
The government agency added that SMBs in the country have access to 400 digital solutions pre-approved for deployment via its CTO-as-a-service platform, which have been tapped by 145,000 users to date.
SMBs also can adopt AI-enabled applications on the platform, where 20% of pre-approved solutions are AI-enabled. IMDA said it plans to increase this figure and encourage an additional 15,000 SMBs to adopt AI solutions over the next two years.
Those looking to do so also can trial generative AI (Gen AI) in a sandbox environment that caters specifically to SMBs. First introduced in February 2024, the second iteration of the sandbox is slated for launch in December with a curated list of 15 Gen AI solutions across various market segments. These include Gen AI for talent acquisition, generative web design, and virtual assistants for customer engagement agents.
IMDA said more than 300 SMBs are expected to leverage the sandbox, with eligible applicants receiving up to 50% funding support to trial one of the Gen AI applications for three months. More than 150 had participated in the first run of the sandbox feature, which ended in May, and 80% of these businesses are running the Gen AI applications after the end of the three months.
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AI adoption rate among SMBs clocked at 4.2% last year, up from 3.5% in 2018.
IMDA added that larger enterprises in Singapore also have turned to AI, with 44% rolling out such applications last year, up from 16.7% in 2018.
The technology sector is growing at more than twice the rate of the rest of the economy, at slightly more than 11%, which underscores the need for all companies, especially SMBs, to embrace the opportunities of digital as an enabler and for growth, said IMDA chief executive Lew Chuen Hong.
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“There will always be global economic uncertainties driven by many macro trends that sometimes are out of our control, but technology as a structural driver will remain the case for the long run,” Lew said. “We will continue to see significant growth as far as digital and the digital economy is concerned.”
“AI has significant potential in the long run and in any tech cycle. We will see some exuberance at the beginning, but at the same time, AI has demonstrated its impact in terms of transforming basics in all sectors,” he said. “The key here is how do we, as a very small country, invest in the right areas to allow the companies to maximize the advantages of this technology.”
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