SINGAPORE- The Republic led 16-14 at the end of the first quarter but went into half-time 37-29 down at the Zayar Thiri Indoor Stadium in Naypyidaw.
It was a deficit the Singaporeans could not overcome.
Desmond Oh and Co. will face the Philippines today.
Their compatriots had better luck in the pool yesterday.
The Republic's water polo team continued the campaign for a 25th successive gold medal with a 8-5 win over Thailand.
Both sides were neck and neck for much of the game, with the score at 6-5 in favour of the defending champions by the end of the third quarter.
Singapore scored twice and shut out the Thais in the final quarter to clinch the win.
Team manager Samuel Wong said: "We started with heavy shelling of the Thais but it was defused by their outstanding defence, especially their goalkeeper.
"We made some changes in terms of positions, with (Loh) Zhi Zhi consolidating the core of our defence as centre back.
"(Koh) Jian Ying also rose to the occasion, scoring a hat-trick which put us back on track."
Singapore will face arch-rivals Indonesia at the Zayar Thiri swimming pool today.
Said Wong: "We are expecting great resistance from the Indonesians, our closest rivals in this tournament.
"If we resume our normal style of play against them, we should be able to contain them."
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