How SMBs and AI adoption are driving Singapore’s robust digital economy

Singapore’s digital economy thrives: Singapore’s digital economy has maintained a significant 17.7% share of the country’s GDP, with small and midsize businesses (SMBs) and artificial intelligence (AI) playing crucial roles in driving growth.

Key economic indicators:

• The digital economy contributed SG$113 billion ($85.31 billion) to Singapore’s GDP in the previous year
• It accounted for SG$1 of every SG$6 in the country’s total economic output
• The digital economy’s compound annual growth rate of 11.2% between 2018 and 2023 nearly doubled the nominal GDP growth rate of 5.8% for the total economy

SMB adoption of digital technologies:

• 94.6% of SMBs have adopted digital technologies in more than one of six key areas, including AI, cybersecurity, cloud, and data analytics
• SMBs using the government’s Productivity Solutions Grant reported average cost savings of 50% between 2018 and 2023
• The CTO-as-a-service platform offers 400 pre-approved digital solutions, with 145,000 users to date

AI integration and growth:

• 20% of pre-approved solutions on the CTO-as-a-service platform are AI-enabled
• IMDA plans to increase this figure and encourage an additional 15,000 SMBs to adopt AI solutions over the next two years
• AI adoption rate among SMBs increased from 3.5% in 2018 to 4.2% in 2023
• Larger enterprises in Singapore have seen AI adoption rise from 16.7% in 2018 to 44% in 2023

Generative AI sandbox for SMBs:

• A sandbox environment specifically catering to SMBs was introduced in February 2024
• The second iteration, set to launch in December, will feature 15 curated generative AI solutions across various market segments
• Over 300 SMBs are expected to leverage the sandbox, with eligible applicants receiving up to 50% funding support for three-month trials
• 80% of the 150+ participants from the first sandbox run continue to use the generative AI applications after the trial period

Technology sector growth and future outlook:

• The technology sector is growing at more than twice the rate of the rest of the economy, at slightly over 11%
• IMDA Chief Executive Lew Chuen Hong emphasizes the need for all companies, especially SMBs, to embrace digital opportunities for growth
• Despite global economic uncertainties, technology is expected to remain a long-term structural driver for growth

Strategic focus on AI:

• AI is recognized as having significant long-term potential across all sectors
• Singapore aims to invest strategically in AI to maximize its advantages as a small country
• The government is committed to supporting companies in leveraging AI technology effectively

Broader implications: As Singapore’s digital economy continues to outpace overall economic growth, the country’s focus on supporting SMBs and fostering AI adoption positions it as a leader in the global digital landscape. The government’s proactive approach to providing resources and funding for digital transformation suggests a long-term commitment to maintaining Singapore’s competitive edge in the rapidly evolving tech-driven economy.