Consequently, growth in the Singapore economy is expected to remain resilient in the short term even as it moderates from the strong outturn in 2025. Tech-related activities, particularly the manufacture and wholesale of electronics and IT equipment, should continue to outperform given the global AI tailwind. Industries such as construction and financial services are also likely to see firm growth. Against this backdrop, the output gap should remain positive, though narrowing from 2025.

Towards the end of 2025, MAS Core Inflation rose to around 1%, mainly reflecting increases in the costs of private health insurance and holiday expenses. Inflation of other goods and services also showed signs of picking up after a period of subdued price increases as firms passed on higher business costs. Prices of non-oil imports have begun increasing, while nominal wage growth also edged higher.

In 2026, quarter-on-quarter changes in core consumer prices are expected to rise from the lows seen earlier in 2025 to a slightly below-trend pace. Continued modest increases in domestic costs and diminishing downward pressures from lower global food and oil prices are expected to underpin the gradual rise in inflation.

For 2026 as a whole, both MAS Core Inflation and CPI-All Items inflation are projected to average 1.0–2.0%, up from 0.7% and 0.9%, respectively in 2025.

Global AI demand could turn out to be more robust than expected, with spillovers to Singapore. Stronger income growth and consumer sentiment may allow firms to pass on cost increases to consumer prices. Supply shocks triggered by geopolitical events could also lead to higher import costs.

Nevertheless, the risks of a sharp negative shock cannot be ruled out. Escalating geopolitical conflict, additional trade frictions or a sharp market re-pricing around AI’s potential could derail growth and weigh on inflation.