By Jun Yuan Yong
SINGAPORE, May 25 (Reuters) – Singapore’s economy grew a greater than expected 6.0% in the first quarter of 2026 from a year earlier, data showed on Monday, but officials said the Middle East conflict had weakened the outlook with downside risks ahead.
The annual gross domestic product figure beat an official advance estimate of 4.6%. On a quarter-on-quarter, seasonally adjusted basis, the economy expanded by 1.0% in the January-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.
It maintained its economic growth forecast for this year at 2.0% to 4.0%.
DOWNSIDE RISKS TO OUTLOOK AHEAD
“Overall, the outlook for the Singapore economy in 2026 has weakened since February,” ministry permanent secretary Beh Swan Gin told a press conference.
“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.”
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 central bank tightened monetary policy due to the risk of the Iran war fuelling inflation. The central bank had held policy steady at its previous three quarterly meetings having eased policy last April.
Speaking at the same event on Monday, central bank chief economist Edward Robinson said its current monetary policy stance remains appropriate.
“For the Singapore economy, interest rates have been fairly stable, having been down through 2025 and we expect that to continue with the proviso of some stability or some surety to U.S. interest rates going into the second half of this year,” Robinson said.
Instead of using interest rates, Singapore manages monetary policy by letting the local dollar rise or fall against currencies of its main trading partners within an undisclosed trading band.
EXPORTS FORECAST RAISED ON AI-RELATED DEMAND
Official data released on Monday showed Singapore’s non-oil domestic exports expanded 9.6% in Q1 2026, led by the electronics segment with growth of 57.8%.
Enterprise Singapore raised its export growth forecast to 3.0% to 5.0%, up from 2.0% to 4.0%, on what it said was resilient AI-related demand.
Risks to Singapore from U.S. trade tariffs also remain, however, with the city-state among countries subject to the Trump administration’s section 301 investigations.
The trade ministry’s Beh said Singaporean officials had returned recently from U.S. talks and do not expect any “positive surprises”.
Inflation data for April will be released later on Monday. In March, core inflation rose 1.7% from a year earlier, and economists expect a similar reading for April.
The central bank in April raised both its core and headline inflation forecasts for 2026 to a range of 1.5% to 2.5%, from 1.0% to 2.0% previously.
(Reporting by Jun Yuan Yong; Editing by Martin Petty)
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