Singapore's core inflation edges up in April; price risks seen tilted to downside

Singapore's core inflation edged up to 0.7% in April, surpassing expectations of 0.5%, while headline inflation remained steady at 0.9%; however, the Monetary Authority of Singapore (MAS) maintains a cautious outlook, citing downside risks to inflation due to global economic uncertainties and U.S. tariffs. This comes after the MAS loosened monetary policy for the second time this year and downgraded its GDP forecast, signaling concerns about growth and potential recession risks.

Analysis

Singapore's April core inflation rate registered at 0.7%, exceeding the median economist forecast of 0.5% and the March figure of 0.5%, while headline inflation held steady at 0.9%, also slightly above the 0.8% forecast. Despite this modest uptick, marking the first rise in annual core inflation since September of the previous year (when it was 2.8%), it represents the fourth consecutive month core inflation has remained below 1%. The Monetary Authority of Singapore (MAS) and the Trade Ministry have explicitly stated that risks to inflation are "tilted towards the downside," attributing this to "heightened uncertainties in the external environment." This cautious outlook is further underscored by the MAS's decision to loosen monetary policy for the second time this year in April and its downward revision of both core and headline inflation forecasts to a range of 0.5% to 1.5%. Compounding these concerns, Singapore recently downgraded its 2025 GDP growth forecast from 1%-3% to 0%-2%, citing the direct and indirect impacts of U.S. tariffs, with officials acknowledging a risk of recession in the city-state. OCBC economist Selena Ling highlighted the "bumpy" path for disinflation, contingent on the outcome of U.S.-China trade negotiations and the existing 90-day U.S. trade truce with China. The prevailing sentiment surrounding this data is strongly negative, with a pessimistic tone, reflecting the significant headwinds facing the Singaporean economy.

Key Decisions for Investors

• Investors should exercise caution with Singapore-centric investments given the downgraded GDP outlook, persistent downside risks to inflation, and official acknowledgment of recession potential.
• Monitoring developments in U.S.-China trade relations, particularly regarding tariffs, and subsequent MAS policy responses will be crucial for assessing shifts in Singapore's economic trajectory.
• Consideration should be given to the potential for further Singaporean dollar weakness stemming from continued monetary easing and deteriorating growth prospects, despite the slight outperformance in April's inflation figures.