The OCBC SME Index inched up to 51.6 in 1Q2026, up from 50.8 in 4Q2025, amid the ongoing geopolitical tensions in the Middle East. This is the fourth consecutive quarter the OCBC SME Index has stayed above 50 and remained in expansionary territory.
“While the OCBC SME Index stayed expansionary in the first quarter, the [OCBC SME] Business Outlook Poll showed that business owners’ sentiments have softened as geopolitical tensions in the Middle East have driven up energy, freight and operating costs,” says Elaine Heng, OCBC’s head of global commercial banking.
According to the OCBC SME Business Outlook Poll, about 43% of the roughly 800 SME business owners polled in 1Q2026 say business conditions have largely remained the same as compared to the previous quarter. However, 22% of respondents say they expect business conditions to deteriorate in the next six months. This represents a 7-percentage point increase from 4Q2025. The poll’s findings were published in a wider report on the OCBC SME Index on April 22.
OCBC says the GDP growth Nowcast based on the OCBC SME Index for 1Q2026 indicates that GDP growth would remain “broadly unchanged” from 4Q2025, “albeit moderated by a weakening outlook amid the Middle East tensions.” The GDP growth Nowcast for 4Q2025 was around 5%. According to the Ministry of Trade and Industry’s GDP advance estimates, Singapore’s GDP grew by 4.6% in 1Q2026.
“Given the short time window since the onset of the conflict, the full impact on SME performance has yet to play out. Ramifications of the ongoing situation might take time to manifest, particularly if the crisis becomes prolonged,” the bank writes in its report.
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Source: OCBC
Persistent tensions could slow business activity
In their report, OCBC says the direct exposure that Singapore SMEs have to the Middle East is relatively contained as more than 97% of their overseas collections and payment flows are outside the region.
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Elaine Heng, OCBC’s head of global commercial banking. Photo: OCBC
“Though most SMEs have limited direct exposure to the region and business flows have remained resilient so far, persistent tensions could result in prolonged cost pressures that would slow down activity in the coming months,” Heng says.
Looking ahead, OCBC expects the index to ease as the conflict in the Middle East continues to drive up costs and hurt the competitiveness of SMEs. Sectors such as transport and logistics, resources as well as building and construction are more exposed to volatility in fuel, freight and insurance costs. They are thus more likely to be disproportionately impacted.
In terms of opportunities, OCBC says the current shock in energy prices could spur SMEs to improve their energy efficiency by looking at sustainable alternatives. The crisis would also push companies to diversify their supplier networks and end markets. This will put them in a stronger position for future macroeconomic shocks.
“We have seen that SMEs that adapt quickly, such as by implementing route optimisation strategies and broadening their network of fuel pumps, have been able to mitigate the fuel price volatility and rising operating costs arising from the Middle East conflict,” Heng says. “This agility, together with SMEs’ ability to diversify their business, will be critical in navigating the challenges.”
