Singapore’s Ministry of Trade and Industry (MTI) has upheld its GDP growth forecast for 2026 at 2.0% to 4.0%, despite significant global uncertainties stemming from the US-Israel-Iran conflict. The announcement follows a strong economic performance in the first quarter of 2026, where the economy expanded by 6.0% year-on-year.
The first quarter’s growth was largely driven by the wholesale trade, manufacturing, and finance and insurance sectors. Notably, the machinery, equipment and supplies segment benefited from robust demand for AI-related products, whilst the electronics and precision engineering clusters also saw substantial growth. However, the conflict has led to higher prices and shortages in crude oil, adversely affecting the fuels and chemicals segment.
The global economic outlook has deteriorated since February, with disruptions in energy supply and increased inflationary pressures. These factors are expected to dampen consumption and tighten financial conditions worldwide. Despite these challenges, AI-related demand continues to bolster regional economies, providing some optimism for the year ahead.
MTI noted that whilst the outlook for sectors reliant on natural gas and crude oil has weakened, sustained AI-related capital spending is expected to drive growth in electronics and precision engineering. The information and communications sector is also projected to grow steadily due to ongoing demand for digital solutions.
Domestically, the construction sector is supported by public works, and the real estate sector benefits from new private residential launches. However, consumer sentiment remains a concern, potentially impacting retail and food and beverage services.
MTI will closely monitor developments and adjust the GDP forecast if necessary, acknowledging the heightened downside risks to Singapore’s economic outlook.
