Singapore’s gross domestic product rose 4.6% year on year in the first quarter. This was below the forecast of 5.4%.
The release compares actual growth (4.6%) with the expected rate (5.4%). It shows growth was 0.8 percentage points lower than forecast.
The gross domestic product figure coming in below expectations points to a cooling economy. This surprise suggests that the growth we anticipated for the start of 2026 has not materialized, creating uncertainty. We should therefore expect downward pressure on Singapore-dollar denominated assets in the near term.
This economic data miss will likely weaken the Singapore Dollar against the US Dollar. We saw non-oil domestic exports fall by 2.8% in February 2026, so this GDP figure confirms a trend of slowing external demand. Derivative traders should consider buying USD/SGD call options to position for a potential slide in the local currency, as the Monetary Authority of Singapore will be less inclined to tighten policy.
For equities, the Straits Times Index (STI) is likely to face headwinds as corporate earnings forecasts are revised downwards. This is reminiscent of the slowdown we observed in late 2025 when global trade figures first began to soften. We can use this opportunity to purchase put options on the STI or establish short positions in index futures as a hedge against a market decline.
Interest rate expectations will also shift, with the market now pricing in a lower probability of any further rate hikes this year. The Singapore Overnight Rate Average (SORA) futures are already reflecting this sentiment, showing a slight dip this morning. We see this as a chance to position for a flatter yield curve through interest rate swaps.
Overall, the data miss has increased market uncertainty, which we are seeing reflected in higher implied volatility on options. Implied volatility on one-month SGD options has already jumped by 15% in early trading, according to our data feeds. Traders should be prepared for larger price swings and adjust their strategies to account for the higher cost of options.
