Economic growth slows in the first quarter of 2026

GDP growth moderates in the first quarter of the year: According to an advance estimate, Singapore's GDP expanded 4.6% in annual terms in Q1, following a downwardly revised 5.7% expansion in the previous quarter. The figure was below market expectations. In seasonally adjusted quarter-on-quarter terms, economic output contracted 0.3% in Q1, following 1.3% growth in the previous quarter, marking the joint-weakest figure since the Q2 2020 pandemic downturn.

Manufacturing slowdown weighs on GDP growth: Relative to the previous quarter's data, figures in Q1 worsened for the industrial sector (+5.4% on a year-on-year basis vs +9.6% in Q4) and the services sector (+4.7% vs +4.8% in Q4). In contrast, the reading for the construction sector improved in Q1 (+9.0% vs +4.6% in Q4). Manufacturing growth edged down as output declined in the general, chemical and biomedical clusters; the fall in biomedical manufacturing may reflect a reversal of the frontloading seen in 2025 ahead of potential U.S. pharma tariffs. Meanwhile, output cuts at Singapore Refining Co. in March, driven by tighter crude supply linked to the U.S.-Iran war, added further pressure on the manufacturing sector toward the end of the quarter. Electronics, transport engineering and precision engineering provided a partial offset.

Economic growth to gradually ease through end-2026: Annual economic growth is expected to moderate in Q2 and further in H2 as higher energy and freight prices stemming from the U.S.-Iran war weighs on consumption at home and abroad, though sustained global demand for semiconductors and electronics will continue to support exports. A further fillip will come from the focus of Singapore's 2026 budget on AI, increased government spending growth and a steady pipeline of public construction projects. The main downside risk to GDP growth is a prolonged closure of the Strait of Hormuz, which would intensify global shipping and energy supply disruptions. The Q1 GDP figures will be revised in May.

Panelist insight: Commenting on the outlook, EIU’s analysts said: “We have revised down our forecast for Singapore’s real GDP growth in 2026 […], reflecting the economic costs of the Iran war. The transmission operates through two main channels. First, higher energy input costs will compress margins across energy-intensive sectors such as manufacturing, aviation and logistics, weighing on investment spending. Second, and more consequentially, a slowdown in global trade volumes will dampen activity in Singapore’s port, re-export and financial services sectors, which together underpin its external-oriented growth model.”

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