Inflation rises but stays below forecasts
Singapore inflation recorded a significant increase in July, reaching the highest level in nearly two years, although it remained below analysts’ forecasts. According to official data, the consumer price index grew 2.2% year on year, a figure lower than that anticipated by experts surveyed by Reuters, who had expected a pace of 2.3%. This increase nevertheless represents a rise from June, when inflation was 1.9%. On a monthly basis, the index fell 0.2%, reflecting a temporary moderation of short‑term inflationary pressures.
Energy prices and geopolitical tensions drive inflation
This development was largely driven by the rise in global energy prices, amplified by geopolitical tensions linked to the Iran conflict, which pushed up electricity and gas tariffs as well as transport costs. A joint statement by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry noted that world oil prices remain high and volatile, and adverse weather conditions are likely to reduce agricultural yields, which will lead to higher prices for imported food. In the same context, it was anticipated that prices of a growing number of imported goods and services will continue to rise in future periods, maintaining pressure on inflation.
MAS tightens monetary policy unexpectedly
In an unexpected move, MAS tightened monetary policy in July, having warned the previous month that imported inflation would likely rise in the coming quarters due to higher fuel and electronic input costs. Core inflation, which excludes private transport and housing prices, came in at 2%, below the analysts’ forecast of 2.2%, indicating occasionally softer pressure on domestic segments of the economy.
Government rolls out support packages
Singapore responded to the pressures generated by the Iran conflict by implementing two support packages for households and businesses, with a total value of approximately 2 billion Singapore dollars. These measures included direct cash payments, consumption vouchers for families, and tax discounts for firms, aimed at mitigating the impact of rising prices on the population and economic activity.
GDP growth forecast for 2026 revised upward
At the same time, inflation data coincided with a significant revision of the 2026 GDP growth forecast. Authorities raised their expectations, now projecting an expansion rate between 4.5% and 5.5%, more than double the lower bound of the previous forecast of 2%–4%. This adjustment reflects confidence in the resilience of the local economy and its ability to adapt policies to external challenges.