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 yesterday.
Increases in the price of water and carpark charges will have less impact, and will contribute to only a small and temporary rise in inflation, he added.
All factors considered, the official headline inflation rate is expected to be between 0.5 per cent and 1.5 per cent for all of 2017, up from 0.5 per cent negative inflation last year.
Singapore's electricity tariff is affected by prevailing gas prices and global oil prices, which picked up in the second quarter of last year, and will likely average higher levels this year.
"In line with this, the electricity tariff… reversed its downward trend to post an increase in the third quarter of 2016 and is generally expected to be higher over the coming quarters," Dr Koh said.
He added: "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."
Mr Zaqy Mohamad (Chua Chu Kang GRC) asked about the current and expected impact of recent price increase announcements on the cost of living.
The headline inflation rate in March was 0.7 per cent, unchanged from February, ahead of a temporary rise in inflation that the Ministry of Trade and Industry has forecast owing partly to the increase in carpark charges, which took effect in December last year.
Along with upcoming increases in water prices - with the first phase to start in July - "the various administrative price adjustments will collectively contribute around 0.2 percentage point to inflation in 2017", Dr Koh said.
GLOBAL MARKET FORCES
In line with this, the electricity tariff… reversed its downward trend to post an increase in the third quarter of 2016 and is generally expected to be higher over the coming quarters... 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.''
SENIOR MINISTER OF STATE FOR TRADE AND INDUSTRY KOH POH KOON
But he told Mr Zaqy that the official inflation forecasts do not take into account the offsets provided by U-Save rebates, which are considered income transfer instead of item price adjustments.
Utilities-Save, or U-Save, rebates are disbursed four times a year to help households offset some of their utility charges. The most recent instalment - last month - benefited some 880,000 Singaporean Housing Board households.
The Government will continue to closely monitor the impact of policy-related price adjustments, which will be smoothed out as far as possible to minimise the impact on the cost of living, said Dr Koh.
"The difficulty is that oil and gas prices are not within our control, and we have to adjust as and when these prices start to fluctuate globally," he said.