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SINGAPORE: Inflation is expected to “ease progressively” over 2027 in line with global energy prices, but a prolonged disruption to energy supplies risks driving up inflation and stifling economic growth here, the Monetary Authority of Singapore (MAS) said in its latest quarterly macroeconomic review on Tuesday (Apr 14).<\/p>\n
“The trajectory of inflation beyond 2026 will depend heavily on global energy and food prices, as well as growth developments,” said MAS, noting that even if supplies from the Middle East resume, global oil prices are expected to remain elevated for some time.<\/p>\n
Prices are already starting to tick up in Singapore and MAS said inflation should eventually peak and decline, in line with the projected moderation in global energy prices. But the risks to the inflation outlook are tilted to the upside, said the central bank.<\/p>\n
“A prolonged disruption to global energy supplies or the unexpected implementation of export controls would lead to even higher import costs for Singapore, and pose upside risks to inflation alongside downside risks to growth,” the report said.<\/p>\n
Household real incomes, which take inflation into account, are likely to be eroded as higher prices of imports feed into domestically produced goods and services. That could then dampen aggregate demand.<\/p>\n
In Singapore, GDP growth for 2026 is expected to “step down” from the 5 per cent reported last year, with the slowdown expected to be broad-based across various sectors, MAS said.<\/p>\n
The output gap – defined as the economic measure of the difference between the actual output of an economy and its potential – is expected to average around zero per cent this year.<\/p>\n
“In the near term, global AI demand is unlikely to unwind abruptly due to committed investments, which in turn should support domestic activity, particularly in the technology-related segments,” said MAS.<\/p>\n
But a more uncertain macroeconomic backdrop and tighter financial conditions could weigh on demand in the latter part of the year, the central bank added.\u00a0<\/p>\n
For example, higher energy prices could feed through to production costs, erode real incomes and weigh on consumption and investment.\u00a0<\/p>\n
MAS also noted that the damage to energy infrastructure during the conflict could have “enduring constraints on downstream production inputs”, which are expected to have “sustained” effects on the Singapore economy.\u00a0<\/p>\n
Downside risks to growth will “compound” if the energy crisis becomes prolonged, MAS said.<\/p>\n
“All in, the impact from the Middle East conflict will weigh on Singapore’s economic activity in the coming quarters, although the extent remains uncertain given the evolving developments,” said the central bank.<\/p>\n<\/div>\n