S'pore records better-than-expected 6% GDP growth for Q1 2026, fuelled by AI demand

Singapore recorded GDP growth of 6 per cent for Q1 of 2026 on a year-on-year basis, the Ministry of Trade and Industry (MTI) announced on May 25, 2026.

This beat MTI's own advance estimate of 4.6 per cent, and outperformed the recorded growth of 5.7 per cent in Q4 of 2025, on a year-on-year basis.

However, on a quarter-on-quarter seasonally-adjusted basis, the economy expanded by 1.0 per cent in Q1 2026, easing from the 1.3 per cent growth in Q42025.

Robust AI-related demand growth

The main driver of this growth? "Robust AI-related demand" led to growth in the machinery, equipment & supplies segment of the wholesale trade sector, as well as the electronics and precision engineering clusters within the manufacturing sector.

MTI added that it should support the growth of regional economies throughout the rest of the year, with sustained global AI-related capital spending.

As well as fuelling growth in Singapore's manufacturing sector, demand for AI-related semiconductors such as networking and memory chips from the data centre end-market is expected to remain robust for the rest of 2026.

The strong performance of the electronics cluster will, in turn, have positive spillover effects on the machinery, equipment and supplies segment of the wholesale trade sector.

In addition, the information & communications sector is expected to register steady growth due to continued enterprise demand for AI-enabled and other digital solutions.

Weighed down by US-Israel War on Iran

However, MTI sounded a note of caution on concerns arising from the U.S.-Israel War on Iran.

The conflict and disruption of shipping through the Strait of Hormuz have led to a spike in the prices of crude oil and its derivative products, and shortages in turn contributed to the contraction of related segments in the wholesale trade and manufacturing sectors.

"If disruptions to the global supply of energy and other inputs arising from the conflict in the Middle East are prolonged and lead to a sustained rise in energy commodity and other key input prices, global growth could slow considerably."

Therefore, the sectors of Singapore's economy directly dependent on natural gas, crude oil and its derivatives have already weakened.

MTI pointed out some of the impacts that have already occurred, such as oil refineries and petrochemical crackers reducing their run rates and reduced trading volumes in the fuels & chemicals segment of the wholesale trade sector.

U.S. "reciprocal" tariffs on Singapore

MTI also warned of the possibility of U.S. President Donald Trump restoring tariff rates on the U.S.'s trade partners in the second half of 2026.

Although Trump was temporarily stymied by a Supreme Court ruling, he is expected to use other policy tools at his disposal to achieve similar tariff rates.

Singapore was initially slapped with a 10 per cent tariff on all exports, labelled "reciprocal" even though Singapore does not impose a tariff on U.S. exports.

Trump subsequently announced a 15 per cent "global tariff" on all countries.

MTI's forecast

Taking into account the surge in AI-related demand, the war in the Middle East and the spectre of renewed U.S. tariffs, MTI has maintained its GDP growth forecast for 2026 at 2.0 to 4.0 per cent.

"On balance, taking into account the latest global and domestic economic developments, MTI’s assessment is that the outlook for the Singapore economy in 2026 has weakened since February."

Nevertheless, in view of the better-than-expected performance of the Singapore economy in Q1 2026, the growth forecast is maintained.

"Nonetheless, downside risks to Singapore’s economic outlook have risen significantly and MTI will continue to monitor developments closely and adjust the GDP growth forecast over the course of the year if necessary."