Singapore: Singapore's economy is expected to maintain a growth rate of 2.0 to 4.0 percent in 2026 despite rising downside risks from the West Asia conflict, according to the Ministry of Trade and Industry (MTI). The MTI reported that the republic's gross domestic product (GDP) saw a 6.0 percent year-on-year increase in the first quarter of 2026, building on a 5.7 percent expansion from the previous quarter.
According to BERNAMA News Agency, the ministry highlighted that downside risks to Singapore's economic outlook have increased significantly. These include global energy supply disruptions, renewed US tariff actions, and potential reductions in global artificial intelligence (AI)-related capital spending. MTI emphasized its commitment to closely monitoring these developments and adjusting the GDP growth forecast if necessary over the course of the year.
MTI attributed Singapore's GDP growth in the first quarter to strong performances in the wholesale trade, manufacturing, and finance and insurance sectors. Robust AI-related demand played a significant role in driving growth within the machinery, equipment, and supplies segment of wholesale trade, as well as in the electronics and precision engineering clusters of the manufacturing sector. Additionally, the finance and insurance sector experienced broad-based growth, with steady performance noted in banking, fund management, and security dealing.
Conversely, the conflict between the United States, Israel, and Iran has led to higher crude oil prices and shortages, resulting in contractions in the fuels and chemicals segment of the wholesale trade sector and the chemicals cluster of the manufacturing sector. MTI also pointed out that since February, the global economic outlook has worsened with the onset of the conflict, particularly due to the blockade of the Strait of Hormuz impacting the supply of energy and other key inputs like fertilizer and aluminum.
The ministry noted that these disruptions have caused a spike in global energy and other input costs, driving up inflationary pressures expected to erode real incomes and dampen consumption, while also leading to a tightening of global financial conditions. These factors are anticipated to weigh on global economic activity for the remainder of the year. However, MTI stated that AI-related demand remains robust and is likely to continue supporting regional economic growth.
Considering these developments, MTI acknowledged that Singapore's external demand outlook for the year has weakened compared to their assessment in February.