Singapore’s economy beats expectations as gov’t warns of Iran war fallout
TL;DR
Singapore's economy grew 6% year-on-year in Q1, surpassing expectations of 4.6%. Strong demand for AI chips and robust performance in wholesale trade and manufacturing sectors drove this growth.
Key points
- Singapore's GDP grew 6% year-on-year in Q1 2023
- Growth exceeded the advance estimate of 4.6%
- Strong demand for AI chips drove economic performance
- Wholesale trade and manufacturing sectors were key contributors
- Seasonally adjusted GDP grew 1% from the previous quarter
Singapore’s economy has grown faster than expected in the first three months of the year as furious demand for AI chips has outweighed the fallout of the United States-Israel war on Iran.
Singapore’s gross domestic product (GDP) expanded 6 percent 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 percent.
On a seasonally adjusted basis, GDP grew 1 percent from the previous quarter.
The Trade Ministry said GDP growth was driven by strong performances of the city-state’s 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 percent despite “downside risks” from rising energy and fertiliser prices because the Iran war has closed the Strait of Hormuz to most shipping.
“These factors will weigh on global economic activity for the rest of the year,” the Trade 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.”
Nearly three months since the start of the war, the collapse of shipping in the strait amid competing Iranian and US blockades continues to cast a shadow over the global 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 the fallout of the conflict.
Anthony Tay, an associate professor of economics at Singapore Management University, said Singapore’s latest GDP figures will be met “more with relief than glee” after local economists raised expectations for growth amid the AI boom.
“For the whole of 2026, the expectation among local economic forecasters is for around 3.6 percent growth, which is a brighter outlook compared with previous quarters … while acknowledging significant downside risks,” Tay 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 Southeast Asian country accounts for about 10 percent of semiconductor production and 20 percent of semiconductor chip equipment production globally.
Q&A
What was Singapore's GDP growth rate in the first quarter of 2023?
Singapore's GDP grew by 6% year-on-year in the first quarter of 2023.
How did the US-Israel war affect Singapore's economy?
Despite the fallout from the US-Israel war on Iran, Singapore's economy showed strong growth, primarily due to demand for AI chips.
Which sectors contributed to Singapore's economic growth in Q1 2023?
The wholesale trade, manufacturing, and finance and insurance sectors significantly contributed to Singapore's economic growth in Q1 2023.
