Economic growth picks up in the first quarter of 2026

GDP growth beats expectations in Q1: According to a second release, Singapore's GDP increased 6.0% in annual terms in Q1, up from both the preliminary estimate of 4.6% and 5.7% growth in the previous quarter. Q1's reading was the strongest since Q3 2024 and beat market expectations. On a seasonally adjusted quarter-on-quarter basis, economic output increased 1.0% in Q1, following a 1.3% expansion in the prior quarter.

Net exports continue to drive economic growth: Compared to the prior quarter's data, readings in Q1 improved for fixed investment (+9.5% on a year-on-year basis vs +7.4% in Q4), goods and services exports (+14.5% vs +12.0% in Q4) and imports of goods and services (+15.3% vs +12.8% in Q4). In contrast, readings worsened for private spending (+3.5% vs +4.5% in Q4) and government spending (-0.5% vs +5.1% in Q4). Net exports stood out as the key engine of economic growth, as Singapore continues to benefit from the global AI-related capex cycle, which has not lost momentum despite the U.S.-Iran conflict. Fixed investment also picked up amid the government-backed AI drive and a strong pipeline of non-residential construction projects. In contrast, domestic consumption growth softened marginally from the previous quarter but still supported GDP growth.

GDP growth to decelerate through end-2026: GDP growth is expected to snap its three-quarter acceleration trend in Q2 and ease further in H2, as higher energy and freight costs due to the U.S.-Iran war weigh on domestic and external demand. That said, Q1’s stronger-than-anticipated outturn has led our panelists to raise their projections for GDP growth in all the remaining quarters of 2026. Firm global demand for electronics should continue supporting exports, partly offsetting the end of pre-U.S.-tariff frontloading, which boosted export growth last year. Singapore’s AI-focused 2026 budget, faster public spending growth and a steady public construction pipeline will provide further impetus. The conflict in the Middle East remains key to monitor, as it could disrupt fuel supply and global trade.

Panelist insight: Jester Koh, an analyst at United Overseas Bank, commented: “We raise our 2026 GDP growth forecast to 3.2%, incorporating the 1Q outperformance alongside sustained AI-related tailwinds, […]. Meanwhile, South Korea’s first 20-day exports data for May showed a 202% y/y jump in semiconductor exports, confirming that AI-related tailwinds could continue to support growth in 2Q26 and possibly 3Q26, likely fully offsetting the associated drag from energy and petrochemical input supply disruptions stemming from the Middle East conflict.” Nomura’s Yiru Chen and Euben Paracuelles added: “Our view that multiple growth engines will continue to drive near-term growth remains intact. We believe the global tech uptrend and broadening AI-related demand continue to provide a boost to electronics output. […] New manufacturing capacity is being built and some will be operational in 2026, representing a step-wise increase in industrial production. […] Growth in the domestic-oriented sectors will also likely remain robust, in our view. A strong manufacturing sector will have some spillovers in the services sector, as evident in Q1.”

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