Singapore Posts 6% GDP Growth in Q1 But Warns of Weakened Outlook
Singapore’s economy grew 6.0% in the first quarter of 2026 from a year earlier, the Ministry of Trade and Industry announced on Monday, May 25, beating an official advance estimate of 4.6% and surpassing the 5.7% growth recorded in the fourth quarter of 2025. Officials said the Middle East conflict had weakened the outlook, with significant downside risks ahead. Arab NewsArab News
The result delivered a stronger-than-expected start to the year — and an immediate warning that the conditions driving it may not hold.
What Drove Growth
On a quarter-on-quarter, seasonally adjusted basis, the economy expanded 1.0% in the January-to-March period, compared with an advance estimate of a 0.3% contraction. The first-quarter growth was mainly driven by wholesale trade, manufacturing and the finance and insurance sectors, supported by strong AI-related demand, the Ministry of Trade and Industry said. Arab News
The sector-level breakdown was sharp. The manufacturing sector expanded 7.9% year on year during the quarter, while wholesale trade grew 11.7%. The finance and insurance sector recorded growth of 5.7%, supported by steady performances in banking and fund management. SingStat
Within manufacturing, AI-related demand led to growth in the electronics and precision engineering clusters. MTI said robust AI-related capital spending supported the growth of regional economies and was expected to continue doing so through the rest of the year. Investing.com
The construction sector also outperformed, with output growth accelerating to 11.8% from 4.6% in the previous quarter, boosted by both public and private sector activity. AOL
Export data reinforced the picture. Singapore’s non-oil domestic exports expanded 9.6% in Q1 2026, led by the electronics segment, which grew 57.8%. Enterprise Singapore raised its export growth forecast to 3.0% to 5.0%, up from 2.0% to 4.0%, citing resilient AI-related demand. Arab News
The Warning on Outlook
The headline number belied official caution. Ministry of Trade and Industry permanent secretary Beh Swan Gin told a press conference: “Overall, the outlook for the Singapore economy in 2026 has weakened since February. Downside risks to Singapore’s economic outlook have risen significantly and MTI will continue to monitor developments closely and adjust the GDP growth forecast over the course of the year, if necessary.” tradingeconomics
The ministry maintained its full-year economic growth forecast for 2026 at 2.0% to 4.0%. That range — kept unchanged from February — is now framed as more at risk than it was when it was set. Arab News
The source of the concern is direct. The conflict and disruption of shipping through the Strait of Hormuz have led to a spike in crude oil prices and derivative product shortages, and those conditions contributed to contractions in related segments of the wholesale trade and manufacturing sectors. Oil refineries and petrochemical crackers have already reduced their run rates, and trading volumes in the fuels and chemicals segment of wholesale trade have fallen, MTI noted. Investing.com
MTI said that if disruptions to the global supply of energy and other inputs from the Middle East conflict are prolonged and lead to a sustained rise in energy commodity and key input prices, global growth could slow considerably. Investing.com
US Tariffs: A Second Pressure
The Middle East conflict is not the only external risk. Singapore is among the countries subject to the Trump administration’s Section 301 trade investigations. Beh said Singaporean officials had recently returned from talks in Washington and do not expect any “positive surprises.” Arab News
MTI said Washington is expected to restore reciprocal tariff rates in the second half of 2026 through alternative trade policy mechanisms, and the outlook on US tariffs remains broadly unchanged. For a city-state whose economy runs on trade, that assessment carries weight. SingStat
The Middle East conflict has upended global growth and inflation trajectories, throwing interest rate expectations into disarray. As a small trade-dependent hub, Singapore is especially vulnerable to supply chain disruptions and volatile energy prices. Last month, the Monetary Authority of Singapore tightened monetary policy due to the risk of the Iran war fuelling inflation. tradingeconomics
Inflation and Monetary Policy
In March, core inflation rose 1.7% from a year earlier, and economists expect a similar reading for April, with official data due to be released later on Monday. The Monetary Authority of Singapore in April raised both its core and headline inflation forecasts for 2026 to a range of 1.5% to 2.5%, up from 1.0% to 2.0% previously. Arab News
Regional and Global Context
The International Monetary Fund projects Singapore’s growth to ease to 3.5% in 2026 and 2.7% in 2027, citing the impact of higher energy prices on the city-state’s economy. The IMF separately lowered its global growth forecast for 2026 to 3.1%, from an earlier estimate of 3.3%. WHBL
Singapore’s Q1 print sits against a backdrop of diverging economic signals across Asia. The city-state’s strong AI-linked electronics and machinery performance mirrors trends seen in other export-oriented Asian economies, but its fuel and chemicals sectors are already absorbing the costs of the Strait of Hormuz disruption in ways that more continental economies have not yet fully felt.
Domestically oriented sectors in Singapore are expected to remain relatively resilient despite weaker consumer sentiment. MTI said the construction sector will continue to be supported by public sector projects, while new private residential launches and stable owner-occupier demand are expected to support the real estate sector. SingStat
Background
Singapore’s economy expanded 5% in 2025, easing from 5.3% growth in 2024, but exceeded MTI’s advance estimate. In the fourth quarter of 2025, GDP rose 6.9% year on year — the strongest pace of expansion since Q4 2021 — driven primarily by manufacturing, wholesale trade, and finance and insurance, with robust AI-related electronics demand providing a key lift. The Q1 2026 result extends that run, though at a pace now complicated by a war that was not a factor when Singapore set its full-year forecast in February. gulfnews
What Happens Next
MTI said it will continue to monitor developments closely and will adjust the GDP growth forecast over the course of 2026 if necessary. Inflation data for April was due for release later on Monday, May 25, with economists expecting a reading close to March’s 1.7% core inflation figure. MTI said sustained global AI-related capital spending is expected to continue supporting growth in Singapore and regional economies through the rest of the year, though the ministry made clear that assessment is contingent on the Middle East conflict not escalating further or prolonging energy supply disruptions. tradingeconomics + 2
