A “more discernible slowdown” is expected ahead, says the Monetary Authority of Singapore (MAS) in its October macroeconomic review.
Despite a pick up in global economic activity in the second quarter due to front-loading in trade, artificial intelligence (AI)-related investments and “generally accommodative” financial conditions, the central bank is seeing some “early signs of softening” emerging
“Labour markets in the advanced economies are beginning to weaken, while export growth in Asia is slowing following the implementation and some escalation of tariffs since August,” says MAS.
An easing in global growth is likely, it adds, as the effects of higher tariffs on production and hiring become more pronounced.
In Singapore, growth is also expected to slow moderately following the stronger-than-expected GDP, which rose by 3.9% y-o-y in 1Q to 3Q this year.
With this in mind, Singapore’s GDP growth is likely to ease to a near-trend pace in 2026 from an elevated base, with the full impact of tariff implementation expected to materialise in the months ahead.
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“The inventories that were previously accumulated before tariff implementation will be depleted, resulting in a more discernible pass-through of tariffs to costs and prices,” says MAS. “Further, the full effect of tariffs has been delayed as the effective rates have lagged the rates based on official announcements, mainly due to implementation challenges.”
In 2026, inflation is less likely to be impacted by imported costs given projections for a more gradual decline in global crude oil prices. That said, services unit labour costs are expected to increase in 2026 as productivity growth normalises. Private consumption is also likely to remain steady amid “healthy” household balance sheets and a broadly resilient labour market.
“The net drags on inflation associated with administrative price changes and their base effects should also unwind more discernibly from 4Q this year,” says MAS.
See also: Singapore's 3Q GDP growth slows to 2.9% with construction and manufacturing sectors easing
To this end, MAS core inflation is expected to trough in the near-term and rise gradually, ranging between 0.5% to 1.5% in 2026. Core inflation should average around 0.5% for 2025.
Headline inflation, or CPI-All items inflation should average 0.5% to 1.0% in 2025 and is forecast to come in at 0.5% to 1.5% in 2026. The anticipated pickup in core inflation is likely to be offset by easing accommodation inflation amid the more modest growth in market rents as well as easing private transport inflation from the further increase in the supply of certificates of entitlement (COE).
