The Singapore economy is expanding at an above-trend pace, buoyed by robust global investment in AI. Growth in 2027 should ease from the strong pace this year, as the AI-driven technology upcycle moderates and global financial conditions tighten. MAS Core Inflation has risen slightly above 2% and should stay at around current rates through H1 2027. Inflation is expected to ease more discernibly in H2 2027 with external cost impulses forecast to fade and domestic costs keeping contained. In October, MAS maintained the prevailing rate of appreciation of the S$NEER policy band, with no change to the width and the level at which it is centred.

Key Messages

Singapore’s technology-led expansion should continue into 2027, albeit at a more measured pace

Global Economy

Economic activity across Singapore’s major trading partners has remained robust, supported by strong global AI-related investment that continues to boost industrial production and trade, particularly in the region. While downside risks are present, global growth is expected to be resilient in the near term before moderating over 2027. Meanwhile, the pass-through of higher energy costs to consumer prices has been gradual. Headline inflation should edge higher in the near term as earlier energy-related cost pressures feed through, before easing next year as these pressures subside.

Singapore Economy

Against this backdrop, the Singapore economy is expected to continue expanding steadily in the quarters ahead. Strong order backlogs and capacity expansions in AI-related production should sustain growth in the near term. While activity in the technology-related sectors is projected to moderate in 2027 relative to the exceptional pace in 2026, it should remain the principal driver of growth. Most other sectors are forecast to expand at around their trend rates.

Core inflation should remain slightly elevated before easing more discernibly in H2 2027

Inflation

In line with expectations, core inflation picked up to slightly above 2% in Jul–Aug, as earlier increases in energy and other imported costs passed through to a broader swathe of domestic prices. Inflation is expected to remain at around current rates in the immediate quarters ahead, as still-elevated energy costs keep electricity & gas and fuel-intensive services inflation high and increases in agricultural input costs and weather-related disruptions raise food prices.

Inflation is, however, expected to ease more discernibly from the middle of 2027. External cost impulses are projected to fade as supply conditions gradually normalise, while contained domestic cost pressures limit second-round effects. Enhanced government subsidies on essential services will also continue to temper inflation in 2027. MAS Core Inflation is expected to average 1.5–2.0% in 2026 and 1.5–2.5% in 2027. CPI-All Items inflation should broadly track core inflation and average around 2.0% this year and 1.5–2.5% next year.

For now, inflation risks remain tilted to the upside

Risks

Inflation could rise by more than anticipated if renewed disruptions in the Middle East lead to another surge in energy prices, or if adverse weather disruptions result in larger increases in food prices. Stronger and more durable domestic growth, including greater spillovers from the AI-driven technology upcycle, could also generate firmer demand conditions and raise the risk of elevated inflation persisting.

Nevertheless, downside risks to inflation are also present. Tighter global financial conditions could weigh on growth and generate disinflationary impulses. Inflation could also fall more quickly than anticipated due to a more decisive resumption of crude and distillate shipments from the Middle East.

In the October policy review, MAS kept the S$NEER policy band on its prevailing appreciation path

MAS’ objective is to secure low and stable inflation over the medium term by managing the policy band of the S$ nominal effective exchange rate (S$NEER).

MAS had pre-emptively tightened monetary policy in April and July in anticipation of the rise in inflation, taking carefully calibrated steps to increase the rate of appreciation of the S$NEER policy band. Core inflation has since risen broadly in line with expectations. It is projected to ease discernibly from the middle of next year, as supply-driven imported inflation slows and domestic costs stay subdued.

MAS therefore maintained the prevailing rate of appreciation of the S$NEER policy band in its October 2026 policy review. There was also no change to the width of the band and the level at which it is centred. The current appreciating policy will allow the S$NEER to continue to strengthen and lean against the near-term rise in imported inflation, ensuring the gradual easing of inflationary pressures in 2027.