Alarm Bells for Singapore as Economic Growth Begins to 'Gloom'

Singapore’s economic growth began to show signs of losing momentum in the second quarter of 2026. Although it still exceeded market expectations, the pace of gross domestic product expansion slowed compared to the previous quarter amid rising global geopolitical risks. According to advance estimates from Singapore’s Ministry of Trade and Industry released on Tuesday, the economy grew 5.7% year-on-year in the second quarter of 2026. This figure was higher than the 5.5% growth projected by economists in a Reuters poll. However, this growth was lower than the revised 6.3% expansion recorded in the first quarter, signalling that the pace of economic expansion is beginning to ease. Economic performance was still supported by the goods-producing industries, particularly manufacturing, which grew 10.4%, up from 8.4% in the previous quarter. Conversely, the services sector lost momentum, with growth slowing to 4.6% from 6.2% previously. DBS Bank Senior Economist Chua Han Teng noted that the economy remained resilient despite being rocked by geopolitical tensions in the Middle East. He expects economic growth to moderate further in the coming quarters due to high base effects and lingering global uncertainties. In May, the Ministry of Trade and Industry maintained its economic growth forecast for Singapore in 2026 at a range of 2% to 4%, but acknowledged that downside risks had increased significantly due to conflicts involving the United States, Israel, and Iran. The GDP data was released ahead of the Monetary Authority of Singapore’s policy decision scheduled for the end of the month. Unlike most central banks which use interest rates as their primary tool, MAS manages monetary policy through exchange rate settings. Singapore’s inflation rate in May was recorded at 1.8%, unchanged from the previous month and the highest level since September 2024. MAS expects inflation for the full year 2026 to be between 1.5% and 2.5%, as global energy prices remain relatively high compared to last year.