Singapore’s economic outlook faces significant challenges as the ongoing US/Israel-Iran conflict exacerbates inflationary pressures, according to UOB Global Economics and Markets Research. The conflict has led to a surge in crude oil and natural gas prices, impacting key sectors such as manufacturing, wholesale trade, and transportation in Singapore.
The report highlights that Singapore’s GDP growth, currently benefiting from AI-related momentum, could suffer if the conflict extends beyond one quarter. The manufacturing sector, which constitutes about 21% of GDP, is particularly vulnerable due to disruptions in semiconductor production caused by helium shortages. This could lead to adverse effects on related sectors, including wholesale trade and transportation.
UOB maintains its GDP growth forecast for Singapore at 3.6% for 2026 but warns of downside risks. The bank also revised its inflation forecasts, projecting headline inflation at 2.0% and core inflation at 1.9% for 2026, up from previous estimates of 1.5%. The report notes that energy prices are likely to remain elevated, with potential long-term impacts due to damaged energy installations in the Middle East.
The Monetary Authority of Singapore (MAS) is expected to tighten monetary policy in response to these inflationary pressures. UOB anticipates a 50 basis points increase in the Singapore dollar nominal effective exchange rate (S$NEER) slope in April 2026, with a further increase projected for October 2026. The report suggests that more aggressive measures could be implemented if inflation exceeds MAS’s baseline projections.
