S'pore economy grows 5.7% in Q2, down from 6.3% in Q1 amid US-Iran War

Singapore's economy grew 5.7 per cent year-on-year in the second quarter of 2026, easing from the 6.3 per cent expansion recorded in the first quarter, advance estimates from the Ministry of Trade and Industry (MTI) released on Jul. 14 show.

On a quarter-on-quarter seasonally-adjusted basis, the economy expanded by 1.1 per cent, moderating from the 1.3 per cent growth seen in the first quarter.

Manufacturing still the star performer

The manufacturing sector remained the standout, growing 12.2 per cent year-on-year in Q2 and accelerating from 8 per cent growth in Q1.

Growth was driven largely by the electronics and precision engineering clusters, on the back of strong AI-related demand for semiconductors and semiconductor manufacturing equipment respectively, MTI said.

Not every segment fared as well, though.

The chemicals cluster contracted due to feedstock disruptions stemming from the ongoing Middle East conflict, while the biomedical manufacturing cluster also shrank.

On a quarter-on-quarter seasonally-adjusted basis, manufacturing grew 5.3 per cent, a turnaround from the 2.2 per cent contraction in the first quarter.

Standard Chartered Bank's Asean and South Asia chief economist Edward Lee, as cited by CNA, said manufacturing alone added 2.5 percentage points to overall growth, with the semiconductor segment providing the bulk of the lift.

Lee said: "This segment of the economy may continue to ... drive economic activity in the coming quarters.”

Construction, trade sectors cool off

Other sectors saw growth ease.

The construction sector expanded 6.2 per cent year-on-year, well down from 12.9 per cent growth in Q1, even as both public and private sector construction output rose.

The wholesale & retail trade and transportation & storage sectors, taken together, grew 6.3 per cent year-on-year, moderating from 9.3 per cent in Q1.

Wholesale trade was buoyed by the machinery, equipment & supplies segment amid strong electronics exports, while growth in transportation & storage was led by the water transport segment.

The cluster comprising information & communications, finance & insurance, and professional services expanded 3.9 per cent year-on-year, extending its 4.5 per cent growth in the previous quarter, supported by continued demand for IT and digital solutions as well as growth in the banking and insurance segments.

The remaining services cluster, accommodation & food services, real estate, administrative & support services, and other services industries, grew 2.7 per cent year-on-year, easing from 3.2 per cent in Q1.

Every sector within this group grew except food & beverage services, with real estate lifted by steady developer activity.

Middle East conflict clouds the outlook

Singapore's growth momentum comes against a backdrop of renewed volatility in the Middle East.

Oil prices climbed to a one-month high on Jul. 14, according to The Business Times, with Brent crude rising 1.7 per cent to settle at US$84.73 (S$109.30) a barrel.

US benchmark WTI crude gained 1.5 per cent to US$79.34 (S$102.35), after the US reimposed its naval blockade on Iran.

Earlier this month, when the ceasefire between the US and Iran appeared to be holding, both benchmarks had eased back to around the levels last seen before the US and Israel struck Iran on Feb. 28.

Higher natural gas prices, which are pegged to oil, have also pushed up electricity tariffs in Singapore.

U.S. President Donald Trump said on Jul. 13, according to Reuters, that the US would resume a blockade on Iranian vessels transiting the Strait of Hormuz, and would impose a 20 per cent "reimbursement fee" on other cargo passing through the waterway, a corridor that used to carry around a fifth of the world's oil consumption.

However he later walked back the reimbursement fee proposal, saying that Gulf countries offered "billions" in trade deals and investments in the U.S. instead.

MTI has said the conflict has already affected the global economic outlook, disrupting the supply of energy and other key inputs such as fertiliser and aluminium amid the blockade of the strait, a reminder of how exposed Singapore's trade-dependent economy remains to developments in the region.

MTI will release preliminary Q2 2026 GDP estimates, along with sectoral performance, sources of growth, inflation, employment and productivity data, in the Economic Survey of Singapore in August.