MAS Hikes 2026 Inflation Forecast: Budget Targets Rising Costs
Singaporeans are closely watching the financial landscape as the Monetary Authority of Singapore (MAS) revises its inflation forecasts for 2026, signaling persistent cost pressures even as the nation’s economy demonstrates robust growth. This dynamic backdrop sets the stage for Budget 2026, which is expected to unveil targeted measures to help households and businesses navigate the rising cost of living.
On January 29, 2026, the MAS announced an upward revision of its 2026 forecasts for both core and all-items inflation. The new projection now stands at a range of 1.0% to 2.0%, an increase from the earlier estimate of 0.5% to 1.5% made in October 2025. This adjustment reflects a combination of factors, including anticipated rising wages due to a tight labor market, stronger domestic demand, and potential supply shocks stemming from geopolitical developments. Despite these inflationary pressures, the MAS has opted to maintain its existing Singapore dollar nominal effective exchange rate (S$NEER) policy band, keeping its rate of appreciation, width, and center unchanged, a move seen as balancing inflation risks with the imperative of fostering sustained economic growth.
Navigating the Inflationary Headwinds
The revised inflation outlook comes at a time when Singapore’s economy is expected to continue its strong performance. The Ministry of Trade and Industry (MTI) recently upgraded Singapore’s full-year 2026 Gross Domestic Product (GDP) growth forecast to a range of 2.0% to 4.0%, up from the previous estimate of 1.0% to 3.0%. This optimistic revision is largely attributed to a stronger-than-expected economic showing in the fourth quarter of 2025, which saw a robust 6.9% year-on-year expansion, and the anticipated sustained global investment boom in artificial intelligence (AI).
Sectors poised for significant growth include manufacturing, particularly the electronics cluster driven by AI-related demand for semiconductors, wholesale trade focusing on machinery, equipment, and supplies, and the resilient finance and insurance sectors. However, this period of economic vibrancy also brings a paradox for many Singaporean households. Despite healthy GDP figures and contained headline inflation (which stood at 1.2% in November 2025), a significant 60% of workers reported living paycheck-to-paycheck, the highest in the Asia-Pacific region. This “Singapore Cost Paradox” underscores the unique structural cost pressures prevalent in the city-state, such as import dependency, land scarcity contributing to high property and car ownership costs, and a mismatch between wage growth and the escalating cost of essential goods and services.
The Widening Impact on Singaporean Households
The impact of rising costs is felt acutely by Singaporeans in several key areas. Medical costs, a critical component of household expenses, are projected to surge by a significant 16.9% in 2026, an increase from 15.5% in 2025. This steep rise is prompting insurers to adjust policies, including increasing co-pays and deductibles, placing a greater financial burden on individuals and families for their healthcare needs. Furthermore, public transport fares for buses and trains saw a 5% increase on December 27, 2025, adding to daily commuting expenses. Looking ahead, a Sustainable Aviation Fuel levy will be applied to all departing flights from October 1, 2026 (for tickets sold from April 1, 2026), and a hike in the carbon tax from S$25 per tonne of carbon dioxide equivalent (tCO2e) to S$45/tCO2e starting in 2026, are expected to translate into higher airfares and electricity tariffs, respectively.
These incremental increases in various cost categories mean that while the overall inflation rate might appear moderate, the cumulative effect on household budgets is substantial, particularly for essential services and goods. A December 2025 survey revealed that 83.4% of Singaporeans anticipate higher headline inflation in 2026, largely driven by global trade policies, highlighting widespread public concern over their purchasing power.
Budget 2026: A Calibrated Response to Rising Costs
With Budget 2026 scheduled to be unveiled on February 12, expectations are high for measures that will alleviate these financial strains. It is anticipated that addressing the rising costs for households and operational expenses for businesses will be a central theme. Analysts foresee a shift towards more targeted support for households, especially those in lower-income brackets, rather than broad-based handouts. For instance, schemes like the Community Development Council (CDC) vouchers, while beneficial, might be scaled back from their generous FY225 quantum to become more precisely directed.
Beyond immediate relief, a crucial focus of Budget 2026 is expected to be on strengthening Singapore’s long-term economic resilience and creating future opportunities. This includes significant initiatives aimed at building an AI-ready economy through investments in skills upgrading, fostering innovation, and promoting inclusion. Such efforts are vital for ensuring that Singaporeans have the capabilities to thrive in evolving job markets, thereby supporting sustained wage growth that can keep pace with rising living costs. Furthermore, the budget is likely to augment existing schemes such as the Market Readiness Assistance (MRA) Grant, BizAdapt Grant, and Enterprise Financing Scheme (EFS), designed to help small and medium-sized enterprises (SMEs) and multinational corporations (MNCs) navigate global trade uncertainties and expand their international footprint. These strategic investments underscore the government’s commitment to enhancing productivity and securing growth at the upper end of the medium-to-long-term range.
Strategic Financial Planning in a Dynamic Environment
For Singaporeans, the current economic climate underscores the critical importance of proactive financial planning. With inflation projected to remain elevated and specific costs like healthcare increasing sharply, diligent retirement planning and wealth accumulation strategies become paramount. Relying solely on traditional savings methods may not be sufficient to safeguard purchasing power over the long term. Exploring diversified investment in Singapore, particularly in resilient sectors like finance, technology, and AI-related manufacturing, offers avenues for growth.
Long term investment approaches, including strategic equity investment, can help individuals leverage Singapore’s robust economic growth and participate in the AI-driven boom. This proactive stance is essential for not only mitigating the impact of rising costs but also for building substantial wealth that can support future financial goals and a comfortable retirement. Understanding how government policies aim to foster an AI-ready economy and support businesses also provides insights into potential growth sectors for investment.
In conclusion, Singapore faces the dual challenge of managing persistent inflation while harnessing the momentum of a strong, AI-driven economy. Budget 2026 is poised to deliver a calibrated response, offering targeted support to households grappling with rising costs while simultaneously investing in structural measures to secure Singapore’s long-term prosperity. For individuals, this period calls for a disciplined approach to financial planning, emphasizing strategic investment and wealth accumulation to navigate the evolving economic landscape effectively.
