Singapore's economy grew faster than expected in the first three months of 2026, as surging demand for AI chips outweighed the fallout from the US-Israel war on Iran.

Singapore's gross domestic product (GDP) expanded 6% year-on-year in the first quarter, the Ministry of Trade and Industry said on Monday, comfortably beating an official advance estimate of 4.6%.

On a seasonally adjusted basis, GDP grew 1% from the previous quarter. The ministry said GDP growth was driven by strong performances in wholesale trade, manufacturing, and finance and insurance sectors.

“In particular, 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,” the ministry said in a statement.

The ministry kept its 2026 growth outlook steady at between 2% and 4% despite “downside risks” from rising energy and fertiliser prices amid the closure of the Strait of Hormuz to most shipping.

“These factors will weigh on global economic activity for the rest of the year,” the ministry said. “On the other hand, AI-related demand has remained robust and should continue to support the growth of regional economies throughout the year.”

Khoon Goh, head of Asia research for ANZ, said the GDP figures likely do not fully reflect the impact of the Middle East crisis. “It will probably be more apparent in Q2, but the solid Q1 GDP sets up a strong base for the rest of 2026,” Goh told Al Jazeera.

Singapore, one of the world's most trade-reliant economies, has played a major role in the global rollout of AI as a producer of semiconductors and semiconductor equipment. The country accounts for about 10% of global semiconductor production and 20% of semiconductor chip equipment production.

Source: www.aljazeera.com