Singapore: UOB sees minimal impact on growth from conflict

Singapore's Economic Exposure to Middle East Tensions Considered Limited

According to UOB Global Economics & Markets Research, represented by Associate Economist Jester Koh, Singapore's GDP is only modestly affected by the ongoing conflict in the Middle East, provided the disruption is brief. Exports to major economies in the region account for just 2% of Singapore’s total exports. UOB maintains its 2026 GDP growth projection at 3.6%, though it notes that indirect effects could arise if global consumption and investment weaken.

Short-Term Growth Risks Appear Manageable

The direct consequences of the recent Middle East escalation on Singapore’s economic growth are currently seen as limited, assuming the conflict does not extend beyond a month and oil prices remain below US$100 per barrel before gradually stabilizing.

However, there is a possibility that secondary impacts could surface, particularly if Singapore’s main trading partners experience reduced consumer spending or investment activity.

Global demand may soften due to lower confidence and potential disruptions in supply chains, which could negatively influence Singapore’s export sector. Given the country’s high economic openness and reliance on external demand, such factors could further restrain growth.

Additionally, rising costs for utilities, transportation, and production inputs may contribute to higher inflation in both goods and services. Historical data from 2005 to 2025 indicates that a US$10 per barrel increase in Brent crude oil prices could lift core inflation by approximately 30 to 40 basis points.

Overall, these conditions suggest that, all else being equal, the Monetary Authority of Singapore (MAS) is more likely to tighten monetary policy at the April 2026 meeting by increasing the S$NEER band slope by 50 basis points to 1.0% per annum. Nonetheless, there remains a chance that policy adjustments could be postponed until July 2026.

In summary, UOB’s analysis indicates that, for now, inflationary pressures from the Middle East conflict are expected to be more significant than any immediate impact on economic growth.

(This report was produced with assistance from artificial intelligence and subsequently reviewed by an editor.)