Singapore faces a delicate trade-off between allowing exchange rates to rise to mitigate cost-of-living concerns, and the need to avoid exports becoming uncompetitive. This week's announcement by the Monetary Authority of Singapore (MAS) draws attention to how global inflationary trends have been exacerbated by the Russia-Ukraine war. For example, the conflict, which is likely to be prolonged, has disrupted grain exports from the two countries, which make up 25 per cent of global exports of wheat and barley, and 14 per cent of corn. Since these grains are used in many kinds of foodstuff, their prices, too, are rising. Rice prices have begun to increase as rice is substituted for wheat.
MAS notes that imported inflation has added to price pressures significantly. Import prices facing Singapore surged by 27 per cent in May this year, compared with the same period last year. Then, a combination of domestic and external factors led to a significant rise in inflation here. Core inflation picked up to 3.6 per cent year on year in May, while consumer price index (all items) inflation, which includes private transport and accommodation costs, rose to 5.6 per cent year on year in May. Singaporeans across the board are feeling the pinch of rising prices. While attendant to their needs, the Government seeks to ensure that fiscal support does not stimulate the economy in a way that exacerbates inflationary pressures.