Inflation rates have been a cause for concern for many countries around the world, due to the Covid-19 pandemic and the ongoing crisis in Ukraine. Singapore, too, is no exception to this.
In their half-yearly macroeconomic review, the Monetary Authority of Singapore (MAS) announced that inflation rates may increase to 3.5% alongside spiking food prices.
On the other hand, labour demand is expected to pick up in the upcoming months. Singapore’s economic recovery is also likely to increase in the latter half of the year.
On Thursday (28 Apr), MAS published its half-yearly macroeconomic review, revealing that inflation is set to “pick up” before peaking in the third quarter of 2022.
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Singaporeans can expect consumer prices to increase, mainly due to a number of factors:
Ultimately, MAS projected a core inflation rate of about 2.5% to 3.5%, up from a previous report of 2% to 3%.
Overall inflation, which includes private transport and accommodation, is expected to be between 4.5% and 5.5%.
According to MAS, both Ukraine and Russia were major exporters of grains and edible oils. The ongoing conflict has thus led to steep price increases for these commodities.
Source: With Ukraine on Flickr
Countries banning export to secure their own supplies further disrupted the global supply chain.
In addition, fertiliser costs have increased, leading to lower agricultural yields. This spike in prices will “remain elevated for some time”.
MAS noted further that the inflation rate in food services rose sharply to 2.6% first quarter of 2022. Rises in the prices of hawker and restaurant food were responsible for such an increase.
Additionally, business cost pressures may build up in the coming months due to increasing material, utility, and labour costs.
Singapore residents can also expect increasing electricity and gas tariffs in Q3 2022, which will translate to greater inflation for transport and food services. The phenomenon is due to rising energy prices.
However, MAS stated that if global commodity prices and supply constraints stabilise and loosen respectively, underlying price pressures may ease as the year draws to a close.
MAS also stated in their review that Singapore may experience significant economic growth as the global economy gradually recovers.
In 2021, Singapore’s trade-related sectors gradually recovered from the pandemic.
This year, we can expect a significant recovery in domestic-oriented and travel-related sectors alongside the easing of pandemic restrictions.
MAS projected earlier in the year that the Singapore economy will expand by 3 to 5% in 2022, provided no further global disruptions occur.
This prediction still holds true. However, the invasion of Ukraine and sanctions imposed on Russia do not bode well for Singapore.
Some deterioration of trade may take place even if exposure to Russia in that field is minimal.
“These factors will continue to play out,” MAS said, “adding to significant uncertainty surrounding…effects from the Russia-Ukraine conflict on Singapore’s economic growth.”
However, Singaporeans can also expect employment opportunities to open up in 2022 in sectors such as travel-related, health, and social services.
Even with the easing of border restrictions, locals still form the lion’s share of total employment in Singapore.
The fall in demand for foreign labour has arisen from increases in labour productivity as a result of investments in automation and technology.
Therefore, the labour market is expected to continue its wage growth above recorded averages in previous years.
The situation has been tight for the last few months due to rising inflation, and if the results of this report are anything to go by, we can expect it to worsen.
We hope the high inflation rates are only temporary and that products and services will revert to their original prices in time to come.
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Featured image adapted from Singapore Commercial Space.
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