Inflation seen rising to 1.5% in 2026, say analysts

The imposition of sustainable aviation fuel is one of the policies that will fuel price movement.

Prices are expected to increase more rapidly next year, reaching 1.5% following the implementation of various measures that lead to cost adjustments, according to experts.

“Looking ahead to 2026F, we expect headline inflation to rise by 1.5% year-on-year, driven by a wave of domestic cost adjustments,” CGS International said in its economic update.

UOB’s Global Economics and Markets Research, meanwhile, said core inflation may reach 1.5% whilst headline inflation will be 1.5%.

Singapore’s core consumer prices reached 1.2% in October, jumping from 0.4% in September, as services, food and retail & other goods registered faster increases.

UOB’s forecast considers the impact of rising costs associated with the green transition as well as administered measures.

“An increase in the airfares component owing to the Sustainable Aviation Fuel levy on all departing flights from 1 October 2026, applicable for tickets sold from 1 Apr 2026, and possible increase in electricity tariffs in [first quarter 2026] driven by the carbon tax hike from S$25/tCO2e to S$45/tCO2e starting in 2026,” UOB said.

There is also the 5% hike in bus and train fares effective 27 December 2025, although partially offset by the lowering of full-day childcare fee caps for anchor and partner operators from 1 January 2026, as announced in Budget 2025.

Meanwhile, CGS International said the wave of domestic cost adjustments include higher healthcare expenses, elevated COE premiums, rising flight ticket prices due to new sustainable-fuel levies, and a higher carbon tax.

“With Oct 2025 inflation broadly in line with our expectations, we continue to see a moderate upward trend in prices, though risks remain asymmetric,” its analysis read.

“On the upside, supply shocks from geopolitical developments could push imported costs higher. On the downside, a sharper-than-expected slowdown in global demand could keep core inflation subdued for longer, whilst another significant drop in global oil prices could temporarily ease overall price pressures,” it added.

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