Private economists lift S’pore’s inflation forecast for both this year and next

SINGAPORE - The prospect of prices continuing to rise has hardened over the past three months as professional forecasters raised their forecast for inflation in Singapore for both 2022 and 2023.

The reopening of the domestic services sector as Covid-19 curbs are eased will continue to encourage consumer spending, according to a quarterly survey released by the Monetary Authority of Singapore (MAS) on Wednesday.

For 2022, the 21 economists and analysts who responded to the MAS survey sent out in November expect the consumer price index for all items – or headline inflation – to come in at between 6 per cent and 6.4 per cent. That is higher than the 5.5 per cent to 5.9 per cent range predicted in the previous survey.

For 2023, headline inflation was forecast at 5.2 per cent, sharply higher than the 3.5 per cent projected in the September survey.

MAS itself expects 2022 headline inflation to average at around 6 per cent for 2022. In 2023, taking into account all factors including the goods and services tax (GST) increase, headline inflation is

projected by MAS to average between 5.5 per cent and 6.5 per cent.

In the survey, the forecast for 2022 core inflation – which excludes private transport and accommodation costs and is seen as a better gauge of the expenses that residents face – was raised to 4 per cent to 4.4 per cent, compared with 3.5 per cent to 3.9 per cent previously.

For 2023, core inflation is forecast to come in at 4 per cent, up from the 3.1 per cent predicted in the September survey.

With both headline and core inflation likely to be lower in 2023 compared with current levels, most respondents do not expect the central bank to adjust its monetary policy stance in the coming April and October.

After experiencing multi-year high inflation for most of 2022, Singapore’s headline inflation, which includes all goods and services, eased to an annual rate of 6.7 per cent in October, from 7.5 per cent in September. That was the first year-on-year inflation pullback in 14 months.

Still, most analysts believe that the recovery in the domestic services sector and the GST hike will keep inflation at a much higher level than the 1.5 per cent average in the past decade.