SINGAPORE, April 16 (Xinhua) -- Singapore's economic outlook for 2026 is facing mounting headwinds, as escalating geopolitical risks and potential energy supply disruptions begin to outweigh still-resilient technology-driven growth, economists said.
UOB Global Economics and Markets Research has in a recent note lowered its full-year 2026 gross domestic product (GDP) growth forecast to 2.5 percent from 3.6 percent previously, citing expectations of a flat quarter-on-quarter performance in the second quarter and a more gradual expansion in the second half of the year.
The research house noted that Singapore continues to benefit from sustained artificial intelligence (AI)-related tailwinds in early 2026, with recent indicators pointing to resilience in the electronics cycle. As of March, the electronics orders-to-inventories ratio in the purchasing managers' index (PMI) remained elevated, signaling supportive conditions for electronics industrial production in the months ahead.
Regional semiconductor exports have also stayed robust, reinforcing the near-term outlook for Singapore's trade-linked sectors.
However, UOB warned that downside risks could intensify if disruptions to cargo flows through the Strait of Hormuz persist. Prolonged constraints on the movement of oil, natural gas and petrochemical feedstocks from the Middle East could trigger significant downstream effects globally.
According to the research house, Singapore's manufacturing sector is particularly exposed, with petrochemicals accounting for about 3 percent of output, rising to roughly 15 percent when the broader chemicals segment is included.
The impact could also spill over into other sectors, including wholesale trade, transport and storage, as well as retail. The latter may face additional pressure from softer inbound tourism if jet fuel costs surge.
Separately, DBS Group Research said in a recent note that Singapore's resilience will likely be tested as the year progresses, given its high exposure to global trade and susceptibility to external shocks.
"We maintain our 2026 real GDP growth forecast at 2.8 percent, but see downside external risks," DBS said, adding that while AI-driven demand supported trade-related sectors in the first quarter, growth momentum has begun to normalize.
The research house expects performance to remain uneven in the coming quarters, amid ongoing Middle East disruptions and lingering tariff-related pressures.
Meanwhile, RHB Investment Bank Research has kept Singapore's 2026 GDP growth projection at 3 percent, but acknowledged potential downside risks toward 2.5 percent, largely driven by elevated oil prices and weakening risk sentiment linked to geopolitical tensions.
In a more adverse scenario, RHB said prolonged tensions into the second half could see growth slowing sharply to between 1 percent and 1.5 percent.
It also warned of increasing headwinds for Singapore's externally oriented sectors from the second quarter onwards, as trade uncertainties persist alongside moderating growth in major economies.
"Accordingly, we adopt a more cautious external-sector view and revise our growth projections downward if the conflicts persist," it said.
Official advanced data showed Singapore's economy expanded 4.6 percent year-on-year in the first quarter of 2026, easing from 5.7 percent in the previous quarter and falling short of market estimates of 5.8 percent. ■
