Singapore Deputy PM Says Middle East Conflict Could Weigh on Economy, Inflation at Risk of Rising

JAKARTA - Deputy Prime Minister of Singapore Gan Kim Yong warned that his country's economy was at risk of slowing down if the Middle East conflict continued. Inflation is also expected to be higher than initial projections, as supply disruptions and rising energy prices begin to spill over into various sectors.

Citing a report by The Straits Times, Gan said in Parliament on April 7 that the impact of rising energy and raw material prices would drive business costs, transportation costs, and the price of daily necessities. "This pressure will be felt by households in the form of more expensive electricity, rising transportation costs, and more expensive daily necessities," said Gan.

According to Gan, low-income households will be the most affected because their spending on basic needs is larger. On the other hand, the manufacturing sector which depends on natural gas, crude oil, and its derivatives will be the most directly affected. The electronics industry, precision engineering, air and sea transport, tourism, retail, food services, and private land transport are also expected to be affected.

Gan, who also served as Minister of Trade and Industry, said the Singapore government would update its GDP growth projection in May. In February, Singapore had raised its 2026 economic growth projection to a range of 2 percent to 4 percent, supported by strong momentum and AI-related demand. However, according to a report by The Straits Times, growth in the next few quarters is now likely to be disrupted by the conflict.

The Monetary Authority of Singapore will also incorporate the latest price developments into the inflation assessment scheduled to be released on April 14. Previously, general inflation and core inflation in 2026 were estimated to be in the range of 1 percent to 2 percent.

Gan highlighted the still vulnerable situation in the Strait of Hormuz. In March, an average of only about six ships per day passed through, far below the normal condition of around 135 ships. He called this disruption the worst since the 1973 oil embargo. Still referring to The Straits Times report, according to the International Energy Agency (IEA), global oil supplies are still at least 8 million barrels per day behind demand.

Singapore is now preparing an inter-agency response through the Domestic Crisis Ministerial Committee. The focus is on securing LNG supplies, solar for power plants, jet fuel, and gasoline, as well as helping businesses, platform workers, and low-income families.

Gan also said Singapore was strengthening its stocks and expanding its import sources. Prime Minister Lawrence Wong has spoken to leaders of Australia and New Zealand to keep the important supply flow smooth. For energy-importing countries in Asia, including Indonesia, this signal from Singapore is worth paying attention to. If the conflict extends, it will not only raise energy prices, but also inflationary pressures in the region.