Singapore Economics: MAS Still Sees Upside Risks Despite Unexpectedly Stable May Core

Research evidence excerpt

Singapore Economics: MAS Still Sees Upside Risks Despite Unexpectedly Stable May Core

ectronics export moderation, though consumer-facing and

tourism sectors may not recover as quickly - Even as our global colleagues remain

cautious on the persistence of supply chain pressures (see Global Multi-Asset -

Turmoil in the Middle East—Implications for Supply Chains), we

nonetheless highlight the potential for SoH closure related headwinds for

transport, petrochemicals and refinery sectors in 2Q26 to turn to tailwinds in 2H26

as the SoH reopens, offsetting an expected moderation in electronics export

momentum, though still at strong levels. We are, however, less optimistic on

recovery prospects for tourism and consumer-facing sectors, which may have a

more direct bearing on core inflation, especially in services. First, Singapore’s

underperformance vs. regional peers in tourism could persist insofar as it is largely

due to underperforming arrivals from China that were less affected by SoH closures

to begin with. Second, with tourist receipts accounting for as much as 10.4% of

retail and 25.4% of F&B sales, continued underperformance may continue to weigh

on these two sectors. The headwinds to discretionary consumer spending could be

compounded by a rise in precautionary savings by residents if the job market

softening in 1Q26 persists.

On balance, for now, our base case remains for MAS to steepen the slope 50bps

in Jul, predicated on the following considerations.

First, a still accommodative policy stance in real terms, with the current slope of

1% p.a. implying a large ~100bps gap with expected core inflation of 2%, whereas

the gap historically averaged around 30bps, and with inflation somewhat above