MAS warns of fresh global shocks and AI pullback, but says Singapore firms and households well-buffered

Domestic borrowing costs have eased over the past year, with the three-month Singapore Overnight Rate Average (SORA) extending its downward trend and Singapore investment-grade credit spreads tightening, MAS said.

The Straits Times Index rose 33 per cent year-on-year in the third quarter of 2026, and bank credit growth remained firm, it added.

“However, rising global interest rates could exert some tightening pressures in the period ahead,” MAS said in its annual review.

ADEQUATE BUFFERS

Most firms and households have strong balance sheets and are expected to remain resilient under stress, said the central bank, adding that its stress tests show that these two sectors have enough buffers to manage shocks to earnings, incomes and financing costs.

Highly leveraged firms or those with thinner liquidity buffers could come under strain, MAS said.

Among households, only a small proportion of borrowers with limited savings buffers could face cash flow constraints, it added.

“In view of the uncertain macroeconomic outlook, firms and households should manage their finances prudently and maintain adequate liquidity buffers against potential stress.”

MAS’ tests confirm that banks and insurers are well-capitalised and can withstand severe macro-financial shocks, it said. Investment funds also have enough liquidity to meet redemption requests under stress, added MAS.

But banks should continue to maintain sound risk management practices and healthy buffers amid the uncertain environment, said the central bank.

For insurers, a broad repricing of risk assets could lead to more fund redemptions and capital losses, it added.

“Investment funds should therefore maintain sound liquidity positions while insurers should ensure that they have adequate capital buffers,” said MAS in the report.