Inflation here set to peak in Q4 and then ease: Wong

Inflation in Singapore is expected to peak in the next two to four months and will start to ease thereafter, said Deputy Prime Minister Lawrence Wong.

But Mr Wong, who is also Finance Minister, added that the extent of this easing towards the year end and where the new inflation rates will stabilise at are big uncertainties.

Inflation here may very well settle at a higher rate, given the geopolitical environment, supply chain issues and how economies are transitioning towards becoming more sustainable, he said. It is not likely to return to the rates Singapore has been used to over the last decade or so, as zero to 1 per cent inflation is a historical anomaly and it never used to be so low.

"We will just have to pay that little bit more in order to be greener, in order to have more resilient supply chains, so we have to be prepared for that new equilibrium where inflation is concerned," said Mr Wong.

He was speaking to Bloomberg editor-in-chief John Micklethwait in an interview on Monday. A transcript was issued by Mr Wong's office yesterday.

Mr Wong noted the Monetary Authority of Singapore has tightened monetary policy four times in the last nine months to dampen inflation, and measures for the most vulnerable are in place.

"Some of the measures we have announced are still being rolled out in the coming months," he said. "We will continue to monitor the situation, and the assurance we give to everyone in Singapore is that if the inflation situation were to worsen, we will certainly be able to provide more assistance."

Beyond inflation, Mr Wong said the Government is concerned about the increasing risks for economic growth next year.

Last week, the Ministry of Trade and Industry narrowed its range for Singapore's growth this year to 3 per cent to 4 per cent, from an earlier projection of 3 per cent to 5 per cent.

Asked about the impending hike in goods and services tax - from 7 per cent to 8 per cent next year and to 9 per cent in 2024 - Mr Wong said Singapore is committed to it. Given a rapidly ageing population and rising healthcare costs, it has to do what is right and spend more, but in a way that is responsible and will not leave a bigger hole for the next generation. This means increasing revenues in a way that is fair and progressive, he said.

The GST increase will not hurt lower-income households as they will be provided with more than sufficient offsets, he added.

"The higher-income will pay the bulk of GST," said Mr Wong.

Asked if Singapore is planning new forms of wealth taxes, he said it always looks at updating its tax and transfer system. "It is a system that is fair and progressive, and it is a system that must underpin a society where we ensure that growth is inclusive and everyone benefits from the nation's progress," he said.

Singapore has not done too badly over the last decade, with broad-based income growth, relatively high levels of social mobility, and a narrowing of income inequality, he said. But the Government will have to keep an eye on this and probably "lean some more in the direction of more inclusive growth", he added.

In Singapore's system, everyone pays some form of taxes, but those with more pay more, and transfers are targeted at those with lower incomes and greater needs, he said.

"We are continuing to see how it can be enhanced, improved and be fit for purpose, increasingly, in a world that is going to be more uncertain and where there will be more forces that will stretch incomes and wealth."