Singapore SMEs Maintain Expansion in Q1 2026, But Middle East War Poses Risks

Gate News message, April 22 — Singapore's small and medium-sized enterprises (SMEs) continued their expansion streak in the first quarter of 2026, with OCBC Bank's SME index rising to 51.6 from 50.8 in Q4 2025, marking the fourth consecutive quarter of growth. However, the ongoing Middle East conflict—which began on Feb 28—threatens to slow momentum as rising oil, energy, and freight costs strain operating margins and disrupt supply chains.

The OCBC SME index, compiled from transactional data of over 100,000 SME customers with annual revenue up to $30 million, uses a 50-point threshold where readings above 50 signal expansion and below 50 indicate contraction. Collections from customers rose 16.9% year-on-year during Q1, while payments to suppliers increased 16%.

Domestic-facing retail delivered the strongest performance with a reading of 53.4—its highest since the index launched in 2021—supported by inbound tourism and stable macroeconomic conditions. Among outward-facing sectors, manufacturing posted 51.6 (up from 51 in Q4) and information and communication technology (ICT) registered 51.4 (up from 51.1), with ICT collections and payments rising 22.2% and 16.5% respectively.

OCBC warned that a prolonged Middle East crisis poses escalating risks, particularly for manufacturing segments reliant on liquefied natural gas imports through the Strait of Hormuz and resource-intensive ICT operations. Business sentiment weakened, with 22% of SMEs expecting deterioration over the next six months—a seven percentage-point increase from the previous quarter—while 26% reported current conditions had worsened.