Singapore economic outlook dulls as Q1 GDP growth comes in below forecasts at 4.6%

[SINGAPORE] The Republic’s economic growth is expected to ease from last year’s strong pace, even as first-quarter gross domestic product remained resilient despite coming in below forecasts.

Singapore’s economy grew 4.6 per cent year on year (yoy) in Q1 2026, moderating from the 5.7 per cent expansion in the previous quarter, advance estimates from the Ministry of Trade and Industry (MTI) showed on Tuesday (Apr 14).

This was below private-sector economists’ median expectations of 5.8 per cent, a Bloomberg poll indicated.

While MTI said growth “remained resilient” in Q1 2026, it warned that the US-Israel-Iran conflict may weigh on economic activity in the coming quarters.

In its latest macroeconomic review released on Tuesday, the Monetary Authority of Singapore (MAS) noted that the situation in the Middle East is “evolving and remains highly uncertain”.

The central bank added that shipping through the Strait of Hormuz has been severely constrained since late February, which has resulted in the sharp rise of prices of crude oil, natural gas and related chemical compounds worldwide.

“In the quarters ahead, higher inflation will also erode real incomes and crimp final demand,” it said.

MAS therefore expects GDP growth in 2026 to tamp down from the above-trend pace of 5 per cent recorded last year; the slowdown is expected to be broad-based across sectors.

The output gap is forecast to average around zero per cent for the year. An updated GDP forecast, now set at 2 to 4 per cent, will be provided in May.

Despite the uncertain outlook, private-sector economists are broadly converging on full-year growth in the 2.5 to 3.5 per cent range, with forecasts largely unchanged but accompanied by greater emphasis on downside risks.

Maybank maintained its 3.4 per cent projection, while DBS kept its estimate at 2.8 per cent but flagged downside external risks. 

“We expect (Q1’s GDP growth) resilience to be tested as the year progresses, with the highly open economy facing renewed geopolitical shocks,” said DBS senior economist Chua Han Teng and senior FX strategist Philip Wee.

Others have turned more cautious. UOB has downgraded its forecast to 2.5 per cent from 3.6 per cent previously, citing softer momentum in the rest of the year. 

RHB kept its 3 per cent baseline, but flagged downside risks. Its group chief economist Barnabas Gan warned that growth could slow to as low as 1 to 1.5 per cent under a more adverse scenario.

Sectoral growth

The moderation in Q1’s growth was driven primarily by a sharp deceleration in the manufacturing sector, which expanded by 5 per cent yoy, down from 11.4 per cent in Q4.

Growth in the sector was driven by higher output in the electronics, transport engineering and precision engineering clusters, which more than offset declines in the biomedical manufacturing, general manufacturing and chemicals clusters.

Sequentially, the manufacturing sector contracted by 4.9 per cent on a seasonally adjusted basis, pulling back from the 4.5 per cent increase in the previous quarter.

In contrast, the construction sector expanded by 9 per cent yoy, accelerating from the 4.6 per cent growth in the previous quarter. Both public and private-sector construction activity supported the expansion during the period. 

Quarter on quarter, construction output rose by 3.7 per cent, faster than the 0.2 per cent expansion in the preceding quarter.

On the whole, the services-producing industries expanded 4.7 per cent on the year, slightly slower than the 4.8 per cent in Q4. 

In the services sector, the wholesale and retail trade and transportation and storage sectors collectively grew by 6.7 per cent yoy, extending the 6.8 per cent rise previously.

Growth in the wholesale trade sector was driven by the machinery, equipment and supplies segment, while the transportation and storage sector benefited from strength in the storage and other support services segment. 

The information and communications, finance and insurance, and professional services cluster maintained steady momentum, expanding 3.9 per cent yoy, up marginally from 3.7 per cent in Q4. 

All constituent sectors posted gains, with strong demand for IT and digital solutions, alongside solid performance in banking and insurance, driving the advance.

The group of sectors comprising accommodation and food services, real estate, administrative and support services, as well as other services grew 2.3 per cent yoy, easing from the 2.9 per cent growth in Q4.

All sectors within the group posted growth during the quarter, with the real estate sector, in particular, expanding on the back of a steady rise in developer activities. 

On a sequential basis, growth in the services-producing industries slowed to 0.6 per cent, from 1 per cent in the previous quarter.