SINGAPORE said its economic outlook for this year has weakened as the energy crunch from the Middle East conflict weighs on global growth, flagging macro risks despite a robust first quarter thanks to the AI boom.
While gross domestic product January-March grew a seasonally adjusted 1% from the previous quarter — well above the median 0.2% forecast in a Bloomberg survey — the city-state warned the US-Israel conflict with Iran will drag on global activity and consumption.
“Downside risks to Singapore’s economic outlook have risen significantly,” the Ministry of Trade and Industry said in its release Monday. It cited threats including continued disruption to global energy supplies, a renewed escalation of US tariff hikes and a sudden pullback in global AI-related capital spending.
Despite that warning, the MTI maintained its 2026 GDP growth forecast at 2%-4%, in line with the upgraded outlook it set in February. Growth came in at 5% last year.
Singapore’s exposure to AI through electronics exports has helped insulate the city-state from both the threat of US tariff hikes last year and now the energy crunch from the Middle East conflict.
Asian manufactures embedded in the AI supply chain, including Taiwan and South Korea, are among the fortunate few that have seen their economies surge on the seemingly insatiable demand for their tech exports and services.
“Sustained global AI-related capital spending should continue to be a key driver of growth for the electronics and precision engineering clusters within the manufacturing sector,” the ministry said in a statement.
Singapore’s resilience so far has spurred strong safe haven demand, supporting its dollar and driving its stock market to a record. Home sales last month hit a six-month high.
From a year earlier, first-quarter growth came in at 6%, compared with 5.2% in the Bloomberg survey and 4.6% preliminary estimate last month.
Singapore’s core inflation gauge in March edged up to 1.7%, but still below the 2% level the its central bank has frequently said it’s comfortable with over the medium-term.
Core inflation for April, due out at 1 p.m. local time Monday, is pegged at 1.8% in a Bloomberg survey. The Monetary Authority of Singapore last month tightened policy, the first such move in Asia. –BLOOMBERG
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