Singapore faces slower growth, higher inflation as Middle East conflict disrupts global supplies: Gan Kim Yong
Singapore must be prepared for the effects of the war to persist for some time, says Deputy Prime Minister Gan Kim Yong.
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SINGAPORE: Economic activity is likely to slow and prices are expected to rise in Singapore as the Middle East conflict continues to disrupt energy supplies and global trade, said Deputy Prime Minister Gan Kim Yong on Tuesday (Apr 7).
Manufacturing companies that rely on natural gas, crude oil and crude oil derivatives will be hit harder, along with energy-intensive industries such as electronics and precision engineering.
Air and sea transport and tourism will be affected by higher costs and weaker demand, while domestically oriented sectors will also face increased operating costs, said Mr Gan, who is also the Minister for Trade and Industry.
“Taken together, these sectoral impacts will weigh on economic activities in the coming quarters, although the extent remains uncertain as the conflict is still unfolding,” he said.
Singapore upgraded its gross domestic product growth forecast for this year to between 2 and 4 per cent, on the back of exceptional economic growth of 5 per cent in 2025.
Mr Gan said the performance in the first three months of the year was resilient, but growth will likely be affected in the coming quarters. The Ministry of Trade and Industry will monitor developments and update its GDP forecast in May.
Fuel and electricity costs have already risen along with global oil and natural gas prices, with a sharper increase expected for the regulated electricity tariff next quarter.
Only a small portion of the recent price surge was captured in April’s tariff adjustment, which is based on prices from January to mid-March.
The Monetary Authority of Singapore (MAS) previously forecast headline and core inflation to be between 1 and 2 per cent this year.
“We now expect Singapore’s overall inflation for 2026 to be higher than earlier projected,” said Mr Gan.
A protracted conflict would also drive up prices of imported goods through higher inflation in overseas markets. Lower-income households will be more affected, he added, as a larger share of their spending goes toward essentials.
MAS will factor in these developments when it releases its inflation outlook assessment on Apr 14.
GOVERNMENT’S EFFORTS
The Singapore government has convened the Homefront Crisis Ministerial Committee, which will focus on securing supplies of liquefied natural gas (LNG), diesel, jet fuel and motor gasoline, among other essential products.
The committee will also seek to strengthen Singapore’s economic resilience by helping businesses maintain production or facilitating transformation where necessary.
Led by Coordinating Minister for National Security K Shanmugam, it will provide targeted help to those most affected – including businesses in the energy and chemicals cluster, platform workers and low-income families – as well as training and employment support for workers and broad-based household assistance to address cost-of-living concerns.
Besides building up inventories and diversifying supply sources, Mr Gan said Singapore must strengthen partnerships with like-minded countries and uphold an open and rules-based trading system.
Prime Minister Lawrence Wong has spoken to his counterparts in Australia and New Zealand to reaffirm Singapore’s commitment to supporting the flow of essential goods and strengthening supply resilience. Essential goods from Australia include diesel and LNG.
The Association of Southeast Asian Nations (ASEAN) has also discussed the importance of maintaining stable, open and global energy supply chains, and minimising disruptions to essential supplies such as food.
Last week, 11 members of the Future of Investment and Trade Partnership issued a joint statement on the importance of not imposing restrictive trade measures on essential goods.
“As a trading nation, keeping faith with our partners and maintaining our credibility is crucial. We must foster the free flow of energy and goods as far as possible,” said Mr Gan.
WEATHERING THE CRISIS
The government will provide support measures to households and businesses, and Singaporeans also need to do their part, Mr Gan said.
Households can conserve electricity by using fans instead of air-conditioning and taking public transport instead of driving. They can also use climate vouchers to buy more energy-efficient appliances, he said.
Businesses can tap the Energy Efficiency Grant to invest in more efficient equipment.
"The crisis is unlikely to be over anytime soon, and we must be prepared for its effect to persist for some time," he said, adding that the situation could escalate further.
It is a reminder that the global system is interconnected and fragile, and Singapore should be ready for more frequent inflation shocks and supply chain disruptions amid heightened geopolitical contestation.
Mr Gan said Singapore must press on with the recommendations of the Economic Strategy Review to build global leadership in key growth sectors and support firms as they internationalise so that the economy remains resilient and competitive.
“Periods of disruption such as this will test the resilience of countries and economies, but it also create impetus for firms to transform, diversify and deepen their capabilities,” he said.
Singapore also needs to keep its energy and supply chains resilient and stay connected to the global economy.
“If we stay disciplined, deepen our trust in each other, preserve our capabilities, and use this period to sharpen our competitive edge, Singapore will be well placed not only to weather this crisis, but to emerge from it stronger,” said Mr Gan.
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