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The Ministry of Trade and Industry (MTI) has chosen to maintain Singapore's 2026 economic growth projection at 0-2%, citing cautious optimism as global trade tensions show signs of easing. This decision comes alongside new data revealing a stronger-than-expected first quarter performance.
Recent figures show Singapore's economy expanded by 3.9% year-on-year in Q1 2026, slightly surpassing April's preliminary estimate of 3.8%. While this marks a solid start to the year, it represents a slowdown from Q4 2024's robust 5% growth.
"The wholesale trade, manufacturing, and financial services sectors powered our first quarter growth," an MTI spokesperson noted. "We observed particular strength in manufacturing and wholesale trade, likely fueled by businesses accelerating orders before anticipated U.S. tariff increases."
However, not all sectors shared in this growth. The accommodation and food service industries contracted during the period due to reduced property lettings and lower consumer spending respectively.
The ministry had previously adjusted its full-year forecast downward in April following Washington's announcement of extensive new tariffs. Since then, global trade dynamics have evolved positively with several key developments:
The U.S.-China agreement for a temporary tariff reduction
A new Economic Prosperity Deal between the U.S. and UK eliminating steel/aluminum tariffs
Ongoing negotiations with multiple trading partners
Cautious Optimism Prevails Despite Positive Signs
While acknowledging these encouraging developments, MTI officials remain guarded about the global economic outlook for the remainder of the year.
"The external demand picture has improved somewhat since April," stated Dr Beh Swan Gin, MTI Permanent Secretary. "However significant uncertainties remain with risks still weighted toward potential downside scenarios."
Sector-Specific Challenges Ahead
The ministry identified several potential pressure points for Singapore's economy: - Manufacturing sector vulnerability due to US market exposure - Potential ripple effects on wholesale trade and logistics - Financial services facing headwinds from weaker trading activity "Our transport engineering cluster shows particular promise thanks to high-value aircraft maintenance contracts," an MTI analyst added.
Temporary Nature of Trade Relief Causes Concern
At a recent media briefing Deputy Prime Minister Gan Kim Yong emphasized that current positive developments might prove fleeting."The US-China tariff pause is certainly welcome but remains temporary," DPM Gan cautioned last week during discussions with reporters.He revealed that based on conversations with US Treasury officials baseline tariffs appear unlikely to disappear completely though sector-specific exemptions may be possible particularly for pharmaceuticals semiconductors through ongoing negotiations.
The government continues monitoring international developments closely prepared make forecast adjustments needed coming quarters ensure accurate timely guidance businesses investors alike according official statements released Thursday afternoon local time.
Reported by Dana Leong for AsiaOne Business, additional research Tan Wei Ming Economics Desk.
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