Singapore Posts 6% Q1 Growth on AI Demand, Warns of Risks

Singapore's economy grew by 6 percent year-on-year in the first quarter of 2026, exceeding expectations and leading the Ministry of Trade and Industry to maintain its full-year growth forecast at 2 to 4 percent despite "significant" downside risks from the Middle East conflict. The first-quarter expansion extended the 5.7 percent growth recorded in the previous quarter, driven primarily by robust artificial intelligence-related demand that boosted the machinery, equipment and supplies segment of the wholesale trade sector, as well as the electronics and precision engineering clusters within manufacturing. The finance and insurance sector also contributed broad-based growth, with steady performance across banking, fund management and security dealing segments. The better-than-expected first-quarter performance comes even as the global economic outlook has deteriorated since a conflict involving Iran began, disrupting energy supplies through the blockade of the Strait of Hormuz. These disruptions have caused a spike in global energy and input costs, driving up inflationary pressures and affecting the fuels and chemicals segment of the wholesale trade sector and the chemicals cluster of the manufacturing sector, which both contracted. The Ministry of Trade and Industry cautioned that downside risks to Singapore's economic outlook have risen significantly and that it would continue to monitor developments and adjust the GDP growth forecast over the course of the year if necessary. In February, the ministry had upgraded Singapore's growth forecast for 2026 to 2 to 4 percent from 1 to 3 percent, expecting strong growth momentum from the fourth quarter of 2025 to be sustained into 2026 largely due to the AI investment boom. Global financial conditions were initially expected to support global growth, but the onset of the conflict has since created substantial uncertainty around that outlook.