Singapore: Growth resilience with AI tailwinds offsetting energy risks
Singapore is confronting the ongoing Middle East conflict from a position of strength, but the renewed geopolitical shock is testing the resilience of its highly open economy.
Group Research - Econs, Chua Han Teng25 May 2026
  • GDP growth in 1Q26 was revised up to 6.0% yoy and 1.0% qoq sa.
  • AI-driven exports remain robust, alongside resilient growth in modern services and construction boom
  • However, energy dependent industries face headwinds from Middle East disruptions.
  • The ESR outlines a refreshed blueprint to sustain growth and jobs in a complex global landscape.
  • Forecast implications: We maintain our 2026 economic growth forecast at 2.8%.
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Growth resilience will be tested

Singapore is confronting the ongoing Middle East conflict from a position of strength, but the renewed geopolitical shock is testing the resilience of its highly open economy. Real GDP growth outperformed again, with an upward revision today to 6.0% yoy and 1.0% qoq sa in 1Q26, above advance estimates of 4.6% yoy and -0.3% qoq sa. The positive adjustment was driven by stronger-than-expected outcomes across the manufacturing, construction, and services sectors.

We still see positive dynamics in key outward-oriented sectors, but expect growth to be uneven and challenged by external uncertainties as the year progresses. Economic prospects in the coming quarters continue to be held hostage by severe disruptions in the Strait of Hormuz and inconclusive US-Iran negotiations.

We maintain our 2026 economic growth forecast at 2.8%, and continue to monitor two-sided risks. The Ministry of Trade and Industry (MTI) also maintained its 2026 GDP growth projection at 2.0-4.0%, in line with our expectations. MTI assessed that the external demand outlook has weakened, taking into account the ongoing Middle East conflict alongside robust artificial intelligence (AI)-related demand, while also highlighting increased downside risks. These include: 1) considerably slower global growth due to prolonged disruptions to global energy supply and other inputs, as well as sustained price increases arising from the Middle East conflict; 2) renewed escalation in US tariff actions; and 3) a sharp correction in global financial markets driven by a worsening of sentiments.

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Chua Han Teng, CFA

Senior Economist - Asean
[email protected]

 

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