(June 8): Singapore Prime Minister Lawrence Wong warned that the economy has yet to feel the full impact of the Middle East conflict, and uncertainty remains over the growth outlook despite a strong performance in the first quarter.
“There’s a lag,” Wong said on Monday at a Singapore Press Club event. “There are downside risks and we do expect more pressures to come on both growth and inflation in the second half of the year.”
Electricity, food and fertiliser costs have not yet reflected the entire increase in global crude prices, the prime minister said. The world economy has also fared better than expected as countries find alternative oil supplies and draw down inventories in response to the closure of the Strait of Hormuz, he said.
If the disruption continues for months and buffers start to dwindle, though, the drag on global demand will be more severe, potentially hitting Singapore’s trade-reliant economy, said Wong.
The city state’s outlook has become clouded as the Middle East conflict, higher energy costs and renewed US tariff threats weigh on global growth. While artificial intelligence (AI)-driven demand continues to support activity, Singapore’s Trade Ministry warned last month that geopolitical conflicts and supply chain disruptions could weigh on the economy in the months ahead.
Economists polled in a Bloomberg News survey expect the Singapore economy to expand 3.3% this year, down from the previous estimate of 3.5% and the 5% posted in 2025.
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Meanwhile, Wong said that a dynamic of “mutually assured disruption” may be unfolding between the US and China, where “any attempt by one side to impose restrictions on another will trigger a response from the other side, and in the end both parties will be worse off”.
He welcomed the recent summit between US President Donald Trump and his Chinese counterpart Xi Jinping, saying the open lines of communication between the world’s two largest economies will reduce the risk of miscalculation.
“For sure, there will be competition, even intense competition, but hopefully that competition will not escalate into outright confrontation or conflict,” Wong said. “It is in the interest of both America and China to maintain this strategic framework and to have that stability in their relationship. It’s also in the interest of countries everywhere in the world.”
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Since Trump’s return to the White House, Wong has repeatedly warned that rising protectionism and intensifying US-China rivalry are contributing to greater economic fragmentation. In his February budget speech, Wong warned of a “more dangerous” world shaped by technological disruption and geopolitical competition, and pledged greater investment in areas including AI and defence.
As one of the world’s most trade-dependent economies, Singapore has sought to diversify its economic links and strengthen partnerships with like-minded countries. Wong has also urged major powers to support open markets and a stable, rules-based trading system.
Wong reiterated that Singapore will continue to forge trade ties and seek partners further afield such as India, the Gulf and Europe. Singapore also sent its top envoy to a rare visit to North Korea last month.
“It doesn’t mean that we agree with everything they do. We don’t. But that should not stop us from having open lines of engagement and continuing to have friendship,” Wong said of the Pyongyang trip.
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