Economists raise inflation projections, lower growth forecasts in first MAS survey since Iran war

[SINGAPORE] Private-sector economists raised their 2026 inflation forecasts sharply, while slightly lowering their growth expectations, the Monetary Authority of Singapore’s (MAS) latest quarterly survey of professional forecasters released on Wednesday (Jun 17) indicated.

The full-year median forecasts were 2.3 per cent for headline inflation and 2 per cent for core inflation, both up from 1.5 per cent in the March survey.

With these increases, the economists’ predictions are closer to the upper end of the authorities’ 1.5 to 2.5 per cent forecast range for both headline and core inflation.

In the first quarter, headline inflation proved to be in line with the previous survey’s forecast of 1.5 per cent.

Core inflation, at 1.4 per cent, was 0.2 percentage point below respondents’ expectations.

For the second quarter, economists project that headline and core inflation will reach 2.1 and 1.6 per cent, respectively.

Meanwhile, the median forecast for 2026 full-year growth fell marginally to 3.5 per cent in the June survey, from 3.6 per cent in March. This is despite higher growth expectations across sectors.

The official forecast range for 2026 full-year growth is 2 to 4 per cent.

In Q1, gross domestic product growth was 6 per cent, slightly surpassing the median expectation of 5.8 per cent in the previous survey.

SEE ALSO

Singapore maintains 2026 growth forecast at 2-4% despite rising downside risks from Iran war

More monetary policy tightening moves on the cards this year, but economists split on July vs October decision

For Q2, the economists expect the economy to grow 4.3 per cent.

The majority of respondents still expect the central bank to keep monetary policy settings unchanged in the upcoming July meeting, but a larger share now expects tightening.

The latest survey was sent to 25 professional forecasters on May 25 and received 22 responses. The survey reflects their views and not those of MAS.

The previous survey was sent out on Feb 10, several weeks before the ongoing conflict in the Middle East began, with the US and Israel launching strikes on Iran on Feb 28.

Sectoral breakdown

Despite the lower forecast for overall growth, expectations for individual sectors improved.

Manufacturing is now expected to grow 5 per cent, notably higher than 4.3 per cent in the previous survey. Finance and insurance is projected to grow 4.5 per cent, up from 3.6 per cent before.

Construction is still expected to have the highest growth rate, at 6.5 per cent, up from 5 per cent.

Wholesale and retail trade is expected to grow 4.9 per cent, up from 4 per cent.

For accommodation and food services, the median growth forecast rose to 1.8 per cent, from 1.3 per cent in the March survey.

MAS noted that while all respondents provide overall forecasts, only some give sectoral breakdowns.

Overall GDP also includes other sectors for which breakdowns are not provided, such as transport and storage as well as professional services.

In line with the higher expectations for manufacturing, the growth forecast for non-oil domestic exports rose to 6.1 per cent, from 4.5 per cent.

But private consumption growth is now expected to be 3.2 per cent, down from 3.5 per cent.

The expected overall unemployment rate for the year stayed the same at 2.1 per cent.

Monetary policy shifts

Most respondents expect monetary policy settings to remain unchanged in July’s upcoming policy meeting, but a larger share now predicts a move to tighten.

In the latest survey, 38.1 per cent of respondents expect MAS to tighten policy in July by increasing the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band. This is up from 23.5 per cent in the previous poll.

The remainder expect no change in the slope of the band.

Expectations of tightening have also risen for the October meeting, with 30 per cent now expecting an increase in slope for the S$NEER policy band, up from 17.6 per cent in the previous survey.

For July’s meeting, one respondent expects MAS to raise the level at which the S$NEER is centred. In the previous survey, no respondents expected this level to be changed.

No economists predict any change to the width of the band.

At its last meeting in April, the central bank increased the rate of appreciation of the S$NEER policy band.

This was its first tightening since October 2022, when it wrapped up a cycle of five consecutive moves to combat post-pandemic inflation.

Before the April meeting, MAS had held its settings steady since July 2025, after two consecutive easing moves in January and April 2025.

Risks to outlook

With this being the first survey since the war on Iran began, a prolonged or escalating conflict in the Middle East was the most cited downside risk to Singapore’s economic outlook, by 85 per cent of respondents.

It was also cited as the top risk by 70 per cent of respondents.

In the previous survey, the most-cited downside risk was other geopolitical tensions, such as trade tensions. It was highlighted by just 35 per cent of respondents in the latest survey, down from 94.4 per cent before.

In the June survey, a potential bursting of the artificial intelligence bubble was also cited by a smaller share of economists, at 60 per cent, down from 66.7 per cent.

For upside risks to Singapore’s outlook, the tech cycle was the most cited. All respondents cited it, up from 94.4 per cent in March, with 80 per cent placing it as the top upside risk.

De-escalation in the Middle East conflict was the next most-cited upside risk, raised by 55 per cent of those surveyed, followed by inflows into Singapore, at 25 per cent.