Singapore holds 2026 GDP forecast at 2-4% amid Mideast conflict risks
Synopsis
Singapore's economy grew 6% in Q1 2026 — faster than the previous quarter — yet the government is holding its full-year forecast steady rather than raising it. The reason: the Middle East conflict has already dented its energy and chemicals sectors, and the IMF is already pencilling in a slowdown to 2.7% by 2027. AI demand is doing the heavy lifting, but it may not be enough if oil shocks deepen.
Key Takeaways
Singapore maintained its 2026 GDP growth forecast at 2% to 4% on 25 May 2026 .
The economy grew 6% year-on-year in Q1 2026 , up from 5.7% in the prior quarter.
Growth was driven by wholesale trade , manufacturing , finance and insurance , and robust AI-related demand .
The Middle East conflict caused contractions in the fuels and chemicals and chemicals manufacturing segments.
The IMF projects Singapore's growth to ease to 3.5% in 2026 and 2.7% in 2027, citing energy price and supply chain risks.
Singapore maintained its 2026 economic growth forecast at 2 per cent to 4 per cent on 25 May, as the Ministry of Trade and Industry (MTI) cited stronger-than-expected first-quarter performance driven by artificial intelligence (AI)-related demand — even as the US-Israel-Iran conflict casts a shadow over the global economic outlook.
First-Quarter Performance
Singapore's economy expanded 6 per cent year-on-year in the first quarter of 2026, accelerating from the 5.7 per cent growth recorded in the preceding quarter. The MTI attributed the momentum to strong performances across wholesale trade, manufacturing, and the finance and insurance sectors.
'AI-related demand has remained robust and should continue to support the growth of regional economies throughout the year,' the MTI said in a statement.
Middle East Conflict Weighs on Energy-Linked Sectors
Despite the headline resilience, the ongoing Middle East conflict has introduced visible strain in specific segments. Higher crude oil prices and supply shortages have contributed to contractions in the fuels and chemicals segment of the wholesale trade sector and the chemicals cluster of the manufacturing sector, according to the ministry.
The MTI acknowledged that the global economic outlook has weakened since the conflict's outbreak, even as AI-driven demand has provided a countervailing buffer.
How the Forecast Has Evolved
The MTI had previously revised its 2026 growth forecast upward in February — from an earlier band of 1 per cent to 3 per cent to the current 2 per cent to 4 per cent — on expectations that the AI investment boom and expansionary fiscal policies in major economies would sustain momentum from the fourth quarter of 2025 into 2026.
Notably, that upgrade now coexists with a more uncertain geopolitical backdrop, reflecting the tension between structural tailwinds and near-term conflict-driven headwinds.
IMF Projects a Gradual Slowdown
The International Monetary Fund (IMF) offered a more cautious read on 19 May, projecting Singapore's growth to ease to 3.5 per cent in 2026 and further to 2.7 per cent in 2027. The IMF cited the Middle East conflict's impact on energy prices and global supply chains as key downside risks.
'Before the war in the Middle East, growth was expected to moderate gradually from 2026 with a normalization in private investment and net exports,' the IMF said following its 2026 Article IV Consultation with Singaporean authorities, held between 7 May and 18 May.
What to Watch
The trajectory of the Middle East conflict and its effect on global energy markets will be the primary variable for Singapore's growth path through the rest of 2026. If AI investment demand holds and oil price pressures ease, the city-state is well-positioned to meet the upper end of its forecast band.
Point of View
And that ceiling is set by geopolitical variables Singapore cannot control. The chemicals and fuels contraction is a canary — if oil disruptions intensify, the damage will spread well beyond those clusters.
NationPress
8 Aug 2026
Frequently Asked Questions
What is Singapore's GDP growth forecast for 2026?
Singapore has maintained its 2026 GDP growth forecast at 2 per cent to 4 per cent, as announced by the Ministry of Trade and Industry on 25 May 2026. The forecast was last revised upward in February 2026 from the earlier band of 1 per cent to 3 per cent.
How did Singapore's economy perform in Q1 2026?
Singapore's economy grew 6 per cent year-on-year in the first quarter of 2026, accelerating from 5.7 per cent in the previous quarter. The expansion was supported by wholesale trade, manufacturing, and finance and insurance, underpinned by strong AI-related demand.
How is the Middle East conflict affecting Singapore's economy?
The US-Israel-Iran conflict has driven up crude oil prices and caused supply shortages, leading to contractions in Singapore's fuels and chemicals wholesale trade segment and the chemicals cluster of its manufacturing sector. The MTI acknowledged that the global outlook has weakened since the conflict began.
What does the IMF project for Singapore's growth?
The IMF projected on 19 May 2026 that Singapore's economic growth would ease to 3.5 per cent in 2026 and further to 2.7 per cent in 2027, citing the Middle East conflict's impact on energy prices and global supply chains.
Why is AI demand important to Singapore's growth outlook?
Robust AI-related demand has been a key driver of Singapore's recent economic momentum, supporting growth in manufacturing, wholesale trade, and financial services. The MTI has said AI demand should continue to support regional economies through 2026, providing a buffer against geopolitical headwinds.
