Parliament: Inflation will rise due to higher energy prices, water price hike has small impact

The official headline inflation rate is expected to be between 0.5 per cent and 1.5 per cent in 2017, up from 0.5 per cent negative inflation last year.
The official headline inflation rate is expected to be between 0.5 per cent and 1.5 per cent in 2017, up from 0.5 per cent negative inflation last year. ST PHOTO: KUA CHEE SIONG

SINGAPORE - The pace of inflation will pick up this year as rising oil prices are set to drive up electricity and petrol prices, Senior Minister of State for Trade and Industry Koh Poh Koon told Parliament on Monday (May 8).

Increases in the price of water and carpark charges will have a lesser impact, he added, saying they will contribute to a small and temporary rise in inflation.

All factors considered, the official headline inflation rate is expected to be between 0.5 per cent and 1.5 per cent in 2017, up from 0.5 per cent negative inflation last year.

Singapore's electricity tariff is pegged to prevailing gas prices, which have picked up since the second quarter of 2016 and will likely average higher this year.

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As a result, the electricity tariff reversed its downward trend to post an increase in the third quarter last year, "and is generally expected to be higher over the coming quarters", Dr Koh said.

"However, notwithstanding the increase, it should be noted that the current tariff remains around 17 per cent lower than the peak reached in the second quarter of 2014," he added.

Mr Zaqy Mohamad (Chua Chu Kang GRC) has asked about the current and expected impact of recent price increase announcements on the cost of living.

March's headline inflation rate was 0.7 per cent, unchanged from February, ahead of a temporary increase in inflation that the Ministry of Trade and Industry has forecasted - as the increase in carpark charges took effect in December last year.

Along with upcoming increases in water prices - the first phase of which is to start in July - the government adjustments will contribute around 0.2 percentage point to inflation in 2017, Dr Koh said.

The forecast, however, does not take into account the offsets provided by U-Save rebates, he added. U-Save rebates - disbursed four times a year - benefited some 880,000 Singaporean HDB households in April.