SINGAPORE – Inflation in Singapore is expected to remain elevated in the first half of 2023 before softening in the second half of the year, said Minister of State for Trade and Industry Alvin Tan on Tuesday.
This will come as global inflation moderates and the tight domestic labour market eases, he added.
Mr Tan was responding to parliamentary questions by Mr Liang Eng Hwa (Bukit Panjang), who asked about the outlook for inflation and the cost of living in 2023, the key drivers of inflation and whether there is further scope to reduce imported inflation with a stronger Singapore dollar.
“Singapore’s inflation outlook this year is dependent on both external and domestic factors. Externally, global inflation is likely to stay firm in the near term, as global energy and food commodity prices remain elevated despite coming off their peaks in 2022,” said Mr Tan.
All-items inflation in Singapore for 2023 is projected to come in at 5.5 per cent to 6.5 per cent, compared with 6.1 per cent in 2022.
Over the same period, core inflation – which excludes accommodation and private transport costs – is expected to average 3.5 per cent to 4.5 per cent, compared with 4.1 per cent in 2022, the Government said.
Domestically, businesses are likely to continue passing on elevated import, utilities and labour costs to consumers, Mr Tan said.
Meanwhile, home rentals and car prices are projected to remain high due to the strong demand for rental housing and tight certificate of entitlement quotas respectively.
Mr Tan added that the Monetary Authority of Singapore had started tightening monetary policy in October 2021, when global inflationary pressures were relatively modest.
As a result, the Singapore dollar has since strengthened by 7.8 per cent against a basket of currencies of its major trading partners.
Mr Liang then asked how much of inflation is domestically driven, and what can be done to manage domestic cost pressures faced by local businesses.
Mr Tan said domestic inflation is related to external factors, such as potential shocks to global commodity prices caused by worsening geopolitical tensions and a jump in demand following the reopening of China’s economy.
This would lead to higher prices for food and energy-related items, he added.
Mr Tan said that persistent manpower shortages could also lead to higher labour cost pressures.
He added: “This tightness in the domestic labour market is expected to ease over the course of the year, with labour demand likely to soften amid global economic headwinds, while the inflow of foreign labour could also help to reduce labour market shortages and moderate labour cost pressures.”
As announced in June last year, the Government is co-funding the wage increases of lower-wage workers for five years from 2022 to 2026 under the Progressive Wage Credit Scheme, Mr Tan said.
“The Government will look into the business environment and assess if more support schemes are required to support our businesses,” he added.