- Singapore is navigating elevated global uncertainty from a position of strength. The country faces upside inflation risks and downside growth risks stemming from a possible escalation of the war in the Middle East.
- Monetary and fiscal policies have been appropriately calibrated and should continue to nimbly respond to shocks. Singapore’s financial sector remains resilient.
- Singapore has made progress towards stronger inclusive growth. As the economy adopts AI, workforce re-skilling and upskilling remain important.
Washington, DC – May 18, 2026: An International Monetary Fund (IMF) team, led by Mr. Masahiro Nozaki, conducted discussions on the 2026 Article IV Consultation with the Singaporean authorities and other stakeholders from May 7 to May 18, 2026. At the conclusion of the discussions, Mr. Nozaki issued the following statement:
“Singapore is navigating another year of elevated global uncertainty. Most notably, the war in the Middle East is transmitting to the economy through an energy shock. Nonetheless, Singapore enters this period of heightened uncertainty from a position of strength. The economy has been expanding at a strong pace, with growth averaging 3.9 percent over 2023-25. Inflation has been low and stable. The financial system has remained resilient, supported by a well‑capitalized and liquid banking sector as well as strong supervisory efforts and regulatory frameworks. Substantial fiscal reserves—which have been successfully deployed in the event of large downside shocks such as the COVID pandemic—remain available.
“Before the war in the Middle East, growth was expected to moderate gradually from 2026 with a normalization in private investment and net exports. Taking account of the impact of the war in the Middle East, growth is now projected to slow to 3.5 percent in 2026 and 2.7 percent in 2027, as higher input prices and short-lived supply chain disruptions put pressure on energy-intensive and trade-related industries. Nonetheless, the ongoing tech upcycle due to the global AI boom continues to provide tailwinds for Singapore. Headline inflation is projected to rise to 2.6 percent in 2026, reflecting pass-through from higher energy prices. With broader second-round effects expected to be contained under stable inflation expectations, headline inflation is projected to decline to 1.9 percent in 2027.
“There is a high degree of uncertainty around this forecast. Risks to growth and inflation are tilted to the downside and upside, respectively, mainly stemming from the possible escalation and prolonged nature of the war in the Middle East—higher energy prices and shortages in fertilizer and petrochemical products could not only generate broad-based inflationary pressures but also weaken domestic and external demand. Additionally, a rise in global trade tensions or a potential bust of the global AI boom would negatively affect Singapore’s export-oriented economy.
“Against this background, staff assesses that the monetary policy tightening in April 2026 was appropriate and to help keep inflation expectations anchored amid rising domestic energy prices. Going forward, the significant upside inflation risks highlight the possibility that inflation expectations can rise, especially if the energy shock persists. Accordingly, the Monetary Authority of Singapore (MAS) should remain data-dependent and stand ready to tighten further if second-round inflation pressures emerge.
“Staff projects the fiscal surplus to decrease to 1.0 percent of GDP in FY2026 (April 2026-March 2027) from 1.6 percent of GDP in FY2025, mainly due to higher development expenditure. The moderately expansionary fiscal stance is broadly appropriate and in line with staff’s recommendations in previous Article IV consultations to gradually reduce fiscal surpluses to accommodate rising medium-term spending needs. The government should stand ready to provide temporary and targeted support for households and businesses affected by the war in the Middle East. However, fiscal policy should be carefully implemented to not amplify inflation pressures.
“Singapore’s financial sector remains resilient. Banks are well-capitalized, liquid, and profitable, supported by strong asset quality. The authorities’ stress tests indicate overall resilience of banks and non-bank financial institutions (NBFIs). Systemic risks from the housing sector remain contained. Continued vigilance is warranted to monitor risks from banks’ cross-border exposures, vulnerable corporates, and linkages between banks and NBFIs. In light of elevated uncertainty, staff welcomes the authorities’ continued efforts to strengthen stress testing, enhance oversight on NBFIs, and engage in contingency planning.
“Singapore continues to make progress toward stronger inclusive growth. AI has been turned into a national growth strategy and the FY2026 budget includes initiatives to support AI adoption by firms. However, the high share of skilled jobs in Singapore makes the labor market exposed to the increasing use of AI in the workplace. In this context, staff welcomes the authorities’ ongoing efforts toward re-skilling and upskilling of Singapore’s workforce.
“The IMF team would like to thank the authorities and other counterparts for their close collaboration and productive discussions.”
READ MORE: https://www.imf.org/en/news/articles/2026/05/18/pr26156-imf-staff-completes-the-2026-article-iv-mission-to-singapore
