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Singapore’s economy continues its somewhat surprising rally, having grown by a whopping 6% in the first quarter of 2026, following a very strong 2025, when it expanded by 5% across the entire year (even though expectations following Trump tariffs were just around 2%).
Data released by the Ministry of Trade & Industry (MTI) appears to also contradict broad business sentiments, which I wrote about last week. While the manufacturing & construction sectors are growing, they contribute just ca. 25% of the GDP and 20% of employment. The mood across Services is considerably worse, due to the unpredictability and rising energy prices unleashed by the war with Iran.
Singaporeans themselves do not seem to be overjoyed by the economic situation too, despite statistical figures showing a rosy picture.
Why is that? And is it going to change?
Not all industries are made equal
First of all, as we all know, averages hide sectoral differences. Even if one part of the economy is doing really well, the rest might not be—or, at least, not yet.
This is especially true now, as the economic growth in Singapore is being fuelled by insatiable demand for electronics amid the global AI boom. As long as the hyperscaling American big tech keeps demanding more chips, Singapore’s semiconductor industry (and a few related ones) is going to steam ahead.
This explains the massive 8.2% year-on-year jump in the Goods-Producing sector, which in Singapore is reinforced by an even stronger construction activity:
Goods Producing Industries: +8.20%
| Industry | Q1 Year-on-Year Growth |
| Construction | 11.80% |
| Manufacturing | 7.90% |
| Utilities | 2.40% |
| Other Goods Industries¹ | 1.30% |
However, as I mentioned last week, the mood is not so rosy everywhere, even within manufacturing itself:
Outside of electronics and precision machinery, others are not so optimistic. Petroleum and Petrochemicals have, obviously, been badly impacted by the events in Iran, seeing their margins squeezed and not knowing when flow of oil and gas from the Gulf resumes.
If you’re employed in one of those, your perspectives may not be so great, and the talk of rapid GDP growth in Singapore may seem like a news report from a foreign country.
Surprisingly, however, despite broad pessimism gripping most of the Services sector, Singapore seems to be doing a bit better than the surveys would have you believe.
Or is it?
Services Producing Industries: +5.70%
| Industry | Q1 Year-on-Year Growth |
| Arts, Entertainment & Recreation | 16.60% |
| Wholesale Trade | 11.70% |
| Accommodation | 6.60% |
| Finance & Insurance | 5.70% |
| Information & Communications | 4.30% |
| Health & Social Services | 3.80% |
| Other Services Industries, of which | 3.60% |
| Other Services – Others² | 3.60% |
| Real Estate | 3.10% |
| Retail Trade | 2.60% |
| Professional Services | 2.60% |
| Transportation & Storage | 1.50% |
| Education | 1.50% |
| Administrative & Support Services | 1.40% |
| Food & Beverage Services | 0.40% |
| Public Administration & Defence | 0.10% |
A jump of 5.7% across the board is nothing to complain about. However, the driver behind this very healthy figure is Wholesale Trade, which recorded a surge of 11.7%, and is also a major contributor to GDP in absolute figures. This is important to bear in mind as Arts, Entertainment & Recreation shows an even higher percentage, but its share of the GDP is very small.
Once you consider that whatever is produced—right now in greater numbers and value than ever—has to be sold and shipped, it becomes apparent that the elevated wholesale trading activity is also linked to the AI boom.
Not only are local merchants selling goods made in Singapore, but are also trading AI-related products coming from other countries.
In other words, the really strong economic data published by MTI for Q1, is heavily skewed by the still hot competition in Artificial Intelligence, which may turn out to be a bubble that pops one day, pushing the country into a recession.
Fortunately, it doesn’t have to be this way.
When will Singaporeans feel the difference?
Besides strong performance of the Accommodation sector, the two solid backbones of Singapore’s prosperity—Finance and IT—are also doing well, having grown by 5.7% and 4.3% respectively. While below the 6% average for the entire economy, nobody would complain about a 4% or higher growth in normal circumstances.
Several other areas are not doing too badly either, rising by over 3%. So, we aren’t just waiting for the AI doomsday to come, as there is some decent activity in other places too.
Not all, though.
Consumer-oriented industries, for instance, are not seeing quite the same uplift. Retail is doing only OK, and the mood is quite despondent following the events in the Middle East, as businesses anticipate a drop in sales in the coming few months due to rising inflation.
F&B, meanwhile, is scrubbing the bottom, which is a surprise to nobody given hundreds of closures in the cutthroat business, badly affected by unsustainably high rents and increase in other operating costs.
Looking at other professions appearing lower on the list, including Professional Services, Transportation or Admin Support, it’s clear that there are many people in Singapore who may not feel like the country is booming.
What’s more, even the companies in better performing industries (outside of the red hot AI, perhaps) may not be too eager to offer their workers a cut in improved results, out of fear over what the future holds.
Since we’re all affected by higher energy prices in some way, operating costs over the next six months are hard to predict. We don’t yet know what the outcome of Iran War is going to be and when the normal trading activity in the Gulf area resumes. It’s not the best time to give out raises.
This is part of the reason why statistically high performance may not necessarily trickle down to the rest of the economy—and to the pockets of regular workers. At least not yet.
Once a peace agreement is finally signed and the crisis settles, businesses around the world—not only in Singapore—are going to tally their unexpected costs and decide how generous they can be for their workers.
If the economic growth, even if driven largely by AI boom, continues, Singaporeans can expect a boost to their earnings. But that could happen only in the second half of the year.
- Read other articles we’ve written on Singapore’s current affairs here.
Featured image: tupungato / depositphotos