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Singapore Holds Growth Outlook Despite Middle East Conflict; Q1 GDP Grows 6%, Beating Forecasts

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Singapore Holds Growth Outlook Despite Middle East Conflict; Q1 GDP Grows 6%, Beating Forecasts

Singapore's economy expanded faster than expected in the first quarter of 2026, boosted by AI-driven demand, prompting the government to reaffirm its growth outlook for 2026 despite the Middle East conflict.

First-quarter GDP expanded 6% year over year, sharper than the 5.7% jump in the fourth quarter of 2025, according to data from the Ministry of Trade and Industry on Monday.

The latest print beat the 5.2% forecast by economists polled by Bloomberg and the 4.6% estimate in a separate poll by Reuters.

On a seasonally adjusted quarter-over-quarter basis, the economy grew 1% in the January-March period, easing from the 1.3% growth in the previous quarter. However, it beat Reuters' forecast for a 0.3% drop.

The Ministry of Trade and Industry maintained its full-year growth forecast at 2% to 4%, unchanged from the range it set in February, although it warned about risks stemming from the US-Iran conflict. The city-state's GDP grew 5% in 2025.

"[D]ownside risks to Singapore's economic outlook have risen significantly," the MTI said, citing the global energy disruption from the Middle East conflict and renewed US tariff actions that could weigh on consumer and business sentiments.

The MTI also warned that a sudden decline in global AI investments could trigger downturns in global financial markets, potentially causing ripple effects throughout the wider economy.

The ministry also acknowledged that the global disruptions have already spilled over to the domestic economy, with oil refineries and petrochemical crackers already reducing their run rates. Several downstream petrochemical and chemical firms have already declared force majeure.

The MTI noted that trading volumes in the fuel and chemicals segment of the wholesale trade sector have declined due to disruptions to energy supplies.

However, the government sees sustained AI spending as a key driver of growth for the electronics and precision engineering clusters within the manufacturing sector.

The MTI expects demand for AI-related semiconductors to remain robust for the rest of the year.

"[R]obust AI-related demand led to growth in the machinery, equipment & supplies segment of the wholesale trade sector, as well as the electronics and precision engineering clusters within the manufacturing sector," the MTI said.

Singapore's manufacturing industry expanded 7.9% in the first quarter, decelerating from the 11.4% growth in Q4 2025, as biomedical manufacturing and chemicals clusters contracted.

The construction sector, however, saw output growth accelerate to 11.8% from 4.6% previously, boosted by expansions in both public and private sector construction output.

The wholesale trade sector grew 11.7%, faster than 9.9% previously, while the retail trade sector rose 2.6%, also speeding up from the 2.3% increase in Q4 2025 on the back of higher non-motor vehicular and motor vehicular sales volumes.

Singapore's real estate sector expanded 3.1% year over year in Q1, softer than the 3.6% increase in the prior quarter.

The Monetary Authority of Singapore last month tightened its monetary policy, citing the risk of inflation from the Middle East conflict. MAS also lifted its core inflation and headline inflation forecast to a range of 1.5% to 2.5% from 1% to 2% previously.

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