Singapore’s economy soars as government warns of fallout from Iran war | World Trade

Singapore’s economy grew faster than expected in the first three months of the year as aggressive demand for AI chips outpaced the fallout from the US-Israel war on Iran.

Singapore’s gross domestic product (GDP) grew 6 percent year-on-year in the first quarter, the Ministry of Trade and Industry said on Monday, beating the 4.6 percent increase.

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On a seasonally adjusted basis, GDP grew 1 percent from the previous quarter.

The Ministry of Commerce said GDP growth was driven by the strong performance of the retail, manufacturing, financial and insurance sectors.

“In particular, the strong demand related to AI led to the growth of machinery, tools and equipment in the retail sector, as well as the electronic and precision technology groups in the manufacturing industry,” the ministry said.

The ministry kept its 2026 risk at between 2 and 4 percent despite “dangers” from rising energy and fertilizer prices while the closure of the Strait of Hormuz to many countries.

“These factors will affect global economic activity throughout the year,” it said.

“On the other hand, AI-related demand has remained strong and should continue to support regional economic growth throughout the year.”

Khoon Goh, head of Asia research at ANZ, said GDP figures may not reflect the impact of the Middle East crisis.

“It looks good in Q2, but the strong Q1 GDP will set a solid foundation for the rest of 2026,” Goh told Al Jazeera.

“AI-related economic growth is fueling the manufacturing industry, and as long as Singapore’s economy is fueled, strong manufacturing jobs will continue to grow,” he said.

Almost three months after the start of the war, the sinking of ships through the Strait of Hormuz between Iran and the US continues to damage the world economy.

The United Nations last week cut its 2026 growth forecast for the global economy to 2.5 percent, down from 2.7 percent, citing a drop in tensions.

Anthony Tay, an associate professor of economics at Singapore Management University, said the latest figures for Singapore’s GDP will be met “with more relief than excitement” as local economists show that it is expected to grow amid the development of AI.

“For the entire year 2026, the expectation among the local forecasters is a growth of 3.6 percent, which is very good compared to the previous regions…

Singapore, one of the most economically dependent countries in the world, has played a major role in the rollout of AI around the world as a developer of artificial intelligence devices.

Southeast Asia accounts for about 10 percent of semiconductor production and 20 percent of semiconductor chip equipment in the world.

Yeow Hwee Chua, a professor of economics at Nanyang Technological University, said the key question is whether strong growth can translate into greater growth and “strong family confidence.”

“A figure of 6% per year is strong, especially for a mature economy like Singapore,” Chua told Al Jazeera.

“It is very encouraging, although I can interpret it with caution because Singapore is very sensitive to international and foreign needs,” he said.