Singapore’s push to lead in artificial intelligence faces mounting headwinds as global economic pressures and persistent talent shortages undercut momentum.
According to a new survey by global HR and payroll platform Deel, conducted with Milieu Insight, 81 per cent of Singaporean companies report negative impacts from global tariffs, with many forced into difficult workforce decisions such as wage freezes, reduced hiring, and retrenchments.
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The findings—based on responses from 350 business leaders across SMEs and large enterprises—reveal a critical inflection point for the island nation’s digital transformation agenda. Despite AI’s promise to boost productivity and efficiency, adoption remains uneven and cautious across the market.
Global shocks temper AI optimism
Singaporean businesses find themselves squeezed between escalating operational costs due to tariffs and the imperative to invest in innovation. More than half (56 per cent) of respondents cite increased costs, with AI-forward companies feeling this pinch even more acutely (86 per cent).
Yet, the potential benefits of artificial intelligence remain compelling. Companies leveraging AI report tangible gains: 71 per cent cite improved productivity, 61 per cent report operational optimisation, and 50 per cent realise cost savings. Nearly a third (31 per cent) have accelerated AI and automation in response to global instability—an indication that AI is seen as a resilience tool in volatile times.
Talent bottlenecks slow AI deployment
Even as the benefits of AI become clearer, Singapore’s talent pipeline lags behind. A staggering 68 per cent of businesses are still in the early stages of AI adoption, with only 12 per cent of SMEs reaching intermediate levels, compared to 43 per cent of larger enterprises.
Talent shortages are the main culprit. Nearly half of the respondents say local AI expertise is insufficient, and high salary expectations, limited career growth, and skill mismatches further hinder recruitment.
As a stopgap, 62 per cent of firms are open to hiring from overseas, but only 20 per cent have budgets set aside to reskill their current workforce—a disconnect that could stall sustainable progress.
“Talent remains the single biggest barrier to scaling AI,” said Nick Catino, Global Head of Policy at Deel. “Cross-border hiring can fill gaps, but must be paired with effective knowledge transfer to uplift local teams”.
Government support recognised but underutilised
Singapore has laid out comprehensive strategies to foster AI, including the National AI Strategy (NAIS 2.0). However, awareness and engagement remain low.
While 92 per centof businesses see government support as vital—particularly in funding and upskilling—only 5 per cent are actively engaging with existing AI frameworks. A striking 95 per cent say they are unfamiliar or only mildly familiar with the governance framework.
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This lack of engagement comes despite calls for stronger regulatory guardrails from 57 per cent of the respondents. The gap suggests that while the government’s intent is clear, execution and awareness-building efforts need urgent reinforcement.
Aligning talent, policy, and tech for a future-ready Singapore
As the AI race intensifies, Singapore must bridge its knowledge and talent gaps to sustain its leadership. Proactive engagement with policy frameworks, robust upskilling strategies, and targeted AI investments will be essential. Only through this alignment can the city-state realise the transformative potential of AI—turning today’s headwinds into tomorrow’s competitive edge.
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