Singapore’s Inflation Hits Record Low Amid Global Economic Uncertainties

Singapore’s core inflation has plummeted to its lowest level since June 2021, reaching just 0.6 percent year-on-year in February 2025, a sharp decline from the 3.6 percent recorded for the same month in 2024. This marks the fifth consecutive month of easing inflation, driven by smaller price increases across most spending categories and outright declines in areas such as electricity, gas, and retail goods. While this slowdown offers relief to households, it also raises questions about the city-state’s economic trajectory amid looming global uncertainties, including potential trade frictions and weakening demand.

Inflation Trends: A Closer Look

The latest figures, released in a joint report by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) on March 24, 2025, paint a picture of a cooling economy. Core inflation, which strips out volatile components like private transport and accommodation to better reflect household expenses, fell from 0.8 percent in January to 0.6 percent in February. This is significantly below the 0.7 percent forecast by economists in a Bloomberg poll, underscoring the unexpected pace of the decline.

Headline inflation, which includes all consumer price categories, also moderated to 0.9 percent year-on-year in February, down from 1.2 percent in January. This slowdown was driven by a combination of factors, including a more gradual rise in private transport costs—up just 1.6 percent compared to 2.8 percent in January—and easing food inflation, which dropped to 1.0 percent from 1.5 percent over the same period. Services inflation, too, softened to 0.8 percent from 1.0 percent, largely due to lower airfares and a steeper drop in holiday expenses.

Some categories saw outright price declines. Electricity and gas costs fell by 3.1 percent in February, following a 2.9 percent drop in January, reflecting lower electricity tariffs and declining gas prices. Retail and other goods also recorded a 0.4 percent decrease, driven by reduced costs for clothing, footwear, and furniture. Accommodation inflation, however, held steady at 1.6 percent, as smaller increases in housing rents were offset by rising maintenance and repair costs.

Rebasing the Consumer Price Index

Adding a layer of complexity to the inflation narrative is the recent rebasing of Singapore’s Consumer Price Index (CPI) to a new base year of 2024, up from 2019. This exercise, conducted every five years, adjusts the index to reflect the latest consumption patterns of Singaporean households. While rebasing can sometimes distort short-term inflation readings, Maybank economist Brian Lee noted that the sharp decline in core inflation over January and February cannot be solely attributed to this technical adjustment. Instead, the data suggests a genuine softening of price pressures across the economy.

Global Context and Domestic Implications

Singapore’s inflation slowdown comes against a backdrop of mixed global economic signals. The MAS and MTI expect imported inflation to remain moderate, thanks to favorable supply projections for key food commodities and anticipated declines in global oil prices. However, they caution that external uncertainties could disrupt this outlook. “While an escalation of trade frictions could be inflationary for some economies, their impact on Singapore’s import prices is likely to be offset by the disinflationary drags exerted by weaker global demand” the joint report stated.

Economists echo these concerns. DBS Bank senior economist Chua Han Teng and UOB associate economist Jester Koh warned that an intensifying global trade war could dampen demand worldwide, potentially pushing Singapore into deflationary territory. “Should tariffs and trade tensions continue to escalate, deflationary risks could surface due to the effects of weaker global demand” Koh remarked. Such risks are particularly pertinent for Singapore, a trade-dependent economy highly sensitive to shifts in global economic currents.

For now, the MAS and MTI have maintained their full-year forecasts for 2025, projecting core inflation between 1.0 and 2.0 percent and headline inflation between 1.5 and 2.5 percent. UOB, however, has revised its core inflation forecast downward to 1.0 percent from 1.3 percent, while keeping its headline inflation projection at 1.3 percent. These adjustments reflect growing caution about the economic outlook, both domestically and internationally.

Policy Responses and Future Outlook

The sustained decline in inflation has given the MAS room to maneuver on monetary policy. In January 2025, the central bank eased its stance for the first time since 2020, opting for a more gradual appreciation of the Singapore dollar to support economic growth. This move was widely seen as a response to slowing inflation and emerging downside risks. OCBC Bank’s chief economist, Selena Ling, suggested that the latest inflation data and broader economic challenges could prompt the MAS to consider further easing at its next policy review in April.

“The slower inflation and downside risks to economic growth give MAS room to ease monetary policy again” Ling observed. Such a step could involve further adjustments to the exchange rate policy, which the MAS uses as its primary tool to manage inflation and economic stability, given that Singapore operates a managed float regime for its currency.

Looking ahead, economists generally expect inflation to continue easing in the coming months, though the trajectory remains uncertain. A sharp downturn in the global economy could accelerate this trend, potentially leading to outright price declines in some sectors. Conversely, unexpected disruptions—such as renewed supply chain bottlenecks or geopolitical tensions—could reignite inflationary pressures, complicating the MAS’s policy calculus.

Household Impacts and Broader Economic Signals

For Singaporean households, the decline in inflation offers a welcome reprieve after years of rising costs. Lower electricity and gas bills, along with softening prices for retail goods, could ease financial pressures on families, particularly those in lower- and middle-income brackets. However, the steady accommodation costs—driven by persistent housing maintenance expenses—mean that not all households will feel the benefits equally.

At a broader level, the inflation slowdown signals potential challenges for Singapore’s economy. As a small, open economy, the city-state is often a bellwether for global economic trends. The combination of easing inflation and warnings about weaker global demand suggests that policymakers and businesses alike may need to brace for a more challenging environment in the months ahead. The risk of deflation, while not imminent, looms as a possibility if external conditions deteriorate further.

Navigating Uncertainty

Singapore’s economic story in early 2025 is one of cautious relief tempered by vigilance. The sharp drop in core inflation to 0.6 percent in February reflects a significant easing of price pressures, offering short-term benefits to consumers and policymakers. Yet, the specter of global trade tensions and weakening demand casts a shadow over the longer-term outlook. As the MAS prepares for its April policy review, the balance between supporting growth and guarding against external shocks will be critical.

For now, the city-state remains in a holding pattern, with households and businesses alike watching for signs of whether this inflation slowdown marks the start of a broader economic shift. As global uncertainties persist, the question remains: can Singapore navigate these choppy waters without sacrificing its hard-won stability?