Global inflation has been on the rise especially due to rising energy prices and food prices because of the ongoing Russian and Ukraine war and the global supply chain disruptions. Inflation is expected to stay higher for longer given that most of the factors are due to supply factors of inflation.
Singapore Consumer Price Index (CPI) All Items rose by 5.4% in April according to data from Singapore Department of Statistics. Singapore’s May CPI will be announced today and is expected to trend higher for the next few months, given the import dependence of Singapore due to the lack of natural resources and as a result disrupted supply chain.
Targeted aid for lower-income and vulnerable. Singapore has introduced a carefully designed S$1.5 billion support package that is tilted to help lower-income and vulnerable groups that have been worse off due to rising prices. Household utilities credit of S$100 for every Singaporean household and 1.5m Singaporean to receive GST Voucher- Cash Special Pay of up to S$300 is expected to be disbursed in August 2022. Other measures were also announced target at taxi main hire and private hire drivers due to rising fuel prices.
SG Consumer Price All Items (%)
GST Hike to Continue. Individuals will likely be disappointed for those that are expectant for the scheduled 1% Goods and Service tax hike to 8% that is scheduled for 2023 to be delayed amid the rising cost of living; during the press conference, the Deputy Prime Minister has confirmed that it is expected to proceed as planned. This is given the longer-term spending requirements of Singapore’s revenue needs due to rising health care spending and the aging population. An offset package that has been implemented may cushion the impact on lower-middle-income households to cushion the impact of the GST increase.
Singapore GDP YoY (%)
Strengthening SGD. Holidaymakers would have found that the Singapore dollar is one of the best performing Southeast Asia currencies this year, relative to many other regional currencies despite the strengthening USD. USD/SGD is presently at 1.39, with SGD depreciated by merely 2.8% year to date to USD. The Monetary Association of Singapore has been early in tackling inflation from the use of its exchange rate policies early in recentering the S$NEER and adjusting the policy band of SGD in April. It is likely that MAS will continue to intervene in its tightening stance even before its October scheduled meeting. A stronger currency is expected to mitigate to some extent the import dependent cost push inflation.
Longer-Term Self Sustainable. Singapore imports around 90% of food supplies and is vulnerable to the concentration of imports from some countries. For instance, a third of chicken imports were affected recently after a chicken export ban from its neighboring country. Better food security over the long run must be tackled with supply side investments for greater sustainability. Singapore’s government is looking in achieve its “30 by 30” goal to produce 30% of nutritional needs by the year 2030. Whilst it is not likely that independence will be achieved it will be a way to diversify our supply chains to mitigate supply and price shocks.
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