SINGAPORE – Singapore does not expect persistent and accelerating inflation, and cost pressures are expected to gradually ease over the year, Minister of State for Trade and Industry Low Yen Ling said in Parliament Tuesday January 11.
Responding to questions from several MPs on inflation issues and the impact on Singapore’s economy and consumers, she said the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore ( MAS) expect inflationary pressures resulting from external factors to be temporary.
Singapore’s headline inflation hit 3.8% in November last year, while core inflation – which it said was a more useful indicator of rising prices, as it excludes charges. accommodation and private road transport – stood at 1.6% in the same month.
Several global factors, such as energy prices, food supply constraints and bottlenecks in transportation hubs, are driving the rise in inflation, Ms. Low said, noting that other countries and regions like the United States, the Eurozone and South Korea are also struggling with inflation.
She said that in the short term, Singapore is expected to continue to face external cost pressures, due to factors such as high global energy prices and bottlenecks in global transportation.
In addition to external cost pressures, Singapore’s domestic wage growth is expected to continue improving as demand for labor strengthens through improving economic activity, Low said. At the same time, as the Covid-19 situation stabilizes, consumer demand is expected to improve, she added.
Given these factors, Singapore’s core inflation is expected to rise in the first half of 2022, before slowing down in the latter part of the year, Low said, adding that it could average within the upper half of the official forecast range of 1 percent to 2 percent for the entire year.
Headline inflation is expected to average 1.5% to 2.5% this year, after the 2.3% expected in 2021.
“MTI and MAS will closely monitor price trends over the next few months of the year, before revising the forecast if necessary,” Ms. Low said.
While the small and open nature of Singapore’s economy limits the government’s ability to shield Singaporeans from inflationary pressures, it spares no effort to mitigate the impact, she added.
To that end, the government has a multi-pronged strategy to ease inflationary pressures, she said.
First, it strives to keep Singapore’s economy competitive so that it can continue to create good jobs to bring sustainable wage growth to Singaporeans. She noted that Singapore’s strong economic recovery in 2021 has helped ensure that resident workers see their real wages increase in 2021 after accounting for inflation.
The growth in real median income of employed full-time residents in 2021 was positive at 1.1%. Real income also rose 4.6% for low-income residents in the bottom 20th percentile, Ms. Low cited.