Cost of living in Singapore

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Spectre of high inflation looms large on Singapore's 2022 growth outlook​

Ovais Subhani

Persistently high levels of inflation can hurt consumers by hitting their purchasing power. ST PHOTO: KUA CHEE SIONG

NOV 24, 2021

SINGAPORE - The rapid and persistent rise in prices may become the most pressing challenge next year for policymakers in Singapore and elsewhere, analysts said.
If unabated, persistently high levels of inflation can hurt consumers by hitting their purchasing power. It can also cut margins for businesses by depriving them of their pricing power.
Central banks usually manage spikes in consumer prices by tightening financial conditions via higher interest rates that lift the cost of borrowing for both consumers and businesses.
But a disproportionate tightening can cause unintended adverse outcomes, especially when the pace of economic growth is expected to ease.
A lack of policy action, on the other hand, can unmoor inflation expectations and hurt both consumption and investments.
Therefore, even as consumer prices have risen to their highest level in eight years in Singapore and are rising at their fastest pace since 1990 in the United States, both the Monetary Authority of Singapore and the US Federal Reserve have held off on any major action until they can be sure that the recent inflationary spike will persist.
However, to lessen the impact of rising imported inflation, MAS ended its 19-month easing stance last month and slightly raised the slope of its Singapore dollar nominal effective exchange rate policy band, up from 0 per cent previously, allowing for a faster appreciation of the local currency.

Analysts said that with the pace of economic growth slowing to between 3 per cent and 5 per cent next year, from an estimated 7 per cent this year, further tightening may hamper the recovery from the depths of the Covid-19-driven downturn.
It is the same situation elsewhere. Growth in China is already off its lightning speed in 2020 and the US economy is also expected to slow down next year.
DBS Bank senior economist Irvin Seah said: "It will be a challenge for central banks worldwide, not just here, to balance the growth and inflation risks. They will be walking a fine line."


Thus, in a rare departure from recent briefings on gross domestic product growth estimates, officials from the Ministry of Trade and Industry and the MAS spent quite some time explaining their view of the inflation risk.
Mr Gabriel Lim, Permanent Secretary for Trade and Industry, said that inflation in Singapore, a small and open economy, has come largely on the back of higher external inflation due to increases in global energy and food commodity prices, and persistent supply bottlenecks in key global industries and transport hubs.
Domestically, wages have also risen as the economy and labour market recover from the Covid-19-driven downturn, he said at a virtual media briefing on Nov 24.
Mr Lim said wages for Singaporeans and permanent residents, not adjusted for inflation, have risen by 1.8 per cent on a year-on-year basis in the first half of 2021, faster than the 1.4 per cent increase in 2020.
"This has contributed to higher services inflation. Private road transport inflation and accommodation inflation have also picked up due to higher car prices and housing rental respectively," he added.

Given an exchange rate-centred monetary policy, the trajectory of domestic interest rates depends on which direction rates are moving in major economies like the US and European Union.
Mr Lim thus explained that should inflation be more persistent than expected, there could be an earlier or larger increase in interest rates than anticipated, thereby triggering a tightening of global financial conditions.
Tighter financial conditions worldwide will hurt Singapore's export-dependent economy.
MAS deputy managing director Edward Robinson said at the briefing that the central bank remains vigilant to the rapid pace of price increases, its persistence and the extent to which it is broadening, and will carefully monitor these three aspects of price developments.
"Our policy shift in October had anticipated the shift in the balance of risks towards firmer inflation pressures," he said.

Singapore's overall inflation is projected to come in at around 2 per cent this year, and average 1.5 per cent to 2.5 per cent in 2022.
Meanwhile, MAS' core inflation measure, which excludes rents and private road transport costs, will likely continue to inch upwards at least through the first half of 2022.
Mr Robinson said core inflation should then gradually ease in the second half of 2022 and average 1 per cent to 2 per cent for the year as a whole.
Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said that since MAS has already tightened in October, it may not need to rush for another move at this juncture.
"But the probability of further tightening at its April 2022 policy review is very high now," she added.

In the meantime, Mr Lim said the Government remains committed to helping Singaporeans from lower-income households who need support for their basic living expenses amid the pick-up in inflation.
The Government, for example, will continue to provide assistance through ComCare and the permanent GST Voucher scheme, which includes rebates for utilities such as electricity costs.
The Government has also provided grocery vouchers to eligible Singaporeans under the Budget 2020 Grocery Vouchers Scheme, he said.

 

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Singapore now Asia's priciest city as inflation adds to Omicron fears​

The new report puts Singapore up two places to joint second with Paris.PHOTO: ST FILE

Kang Wan Chern
Assistant Business Editor

Dec 1, 2021


SINGAPORE - Singapore is the most expensive Asian city to live in, with supply chain disruptions and rising fuel costs driving inflation to its highest level in years, noted a report on Wednesday (Dec 1).
The new report from the Economist Intelligence Unit (EIU) puts Singapore up two places in its index to joint second with Paris. The top spot is now occupied by Tel Aviv, which dislodged Hong Kong to become the most expensive city in the world.
"Supply chain problems, as well as exchange-rate shifts and changing consumer demand, have led to rising prices for commodities and other goods. The most rapid increases in the index were for transport, with the price of a litre of petrol up by 21 per cent on average," the report said.
Ms Upasana Dutt from the EIU said the rise in petrol prices has been "particularly stark" across the 173 cities covered by the index.
Some other analysts say the emergence of Omicron could change these dynamics, even though the new variant's economic implications have yet to be fully understood.
On the one hand, "the risk of a lethal Omicron virus could tame inflation pressure from commodity prices" if demand falls and growth is impacted, said Dr Chua Hak Bin, a senior economist at Maybank Kim Eng.

On the other hand, it may worsen component shortages and supply chain bottlenecks, driving prices higher in Singapore.
Dr Chua reckons "inflation will likely remain a risk unless Omicron turns out to be far more lethal than Delta and forces governments to reintroduce strict lockdowns".
The inflation rate of the prices tracked across cities in the EIU's Worldwide Cost of Living index was the highest recorded over the past five years, at 3.5 per cent.
Singapore reported a jump in overall inflation to 3.2 per cent in October on a year-on-year basis, up from 2.5 per cent in September. It was the highest level since March 2013, with stronger private transport and rental costs, in addition to pricier services and food.


Mr Ben Luk, a senior multi-asset strategist at State Street Global Markets, said the investment management firm is "increasingly concerned over persistent inflation, as eight out of the 10 factors that we track indicate prices trending higher on the back of seasonality trends, supply side pressure, media intensity and, last but not least, wage pressures".
Mr Salman Ahmed, global head of macro and strategic asset allocation at fund manager Fidelity International, warned that "the new virus variant appears to be a serious concern given its association with higher transmissibility and immunity neutralisation".
He pointed out that Omicron could be a "game changer" for the market, adding that more stringent domestic and international mobility restrictions could be on the cards at a time when risks to a global recovery are rising from a slowing Chinese economy and global energy crunch.

With inflation likely to stay sticky at elevated levels, and further supply chain disruptions potentially pushing it even higher, Mr Ahmed said central banks will face more challenges in implementing appropriate monetary policy to stabilise prices.
DBS Group Research's senior currency strategist, Mr Philip Wee, is expecting another round of monetary policy tightening by the Monetary Authority of Singapore next year.
Markets are already expecting the United States Federal Reserve to raise rates next year, after chairman Jerome Powell told a congressional hearing on Tuesday that the tapering of the Fed's asset purchase programme would be brought forward to stabilise prices.
"The (US) economy is very strong and inflationary pressures are high," he said. "It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases... perhaps a few months sooner."
Ms Dutt from the EIU said that while wages and the cost of living in many cities are expected to rise over the coming year, "we are also expecting central banks to raise interest rates, cautiously, to stem inflation. So the price increases should start to moderate from this year's level".

 

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Rice to bananas: How inflation has affected the prices of 5 grocery items in Singapore​

Singapore has not been spared from rising prices worldwide, with its small and open economy that is reliant on global trade. ST PHOTO: KUA CHEE SIONG

Prisca Ang

DEC 3, 2021

SINGAPORE - The spectre of rising inflation looms large as global economies bounce back from the troughs of the Covid-19 pandemic and the supply chain crunch wears on.
Singapore has not been spared, with inflation hitting an eight-year peak in October - 3.2 per cent on a year-on-year basis - partly due to costlier cars and higher housing rents.
Core inflation, which excludes rents and private road transport costs, climbed to 1.5 per cent - its highest in nearly three years.
This number better captures the underlying trend in consumer prices and is the measure the Monetary Authority of Singapore (MAS) monitors most closely.
Inflation is not necessarily bad; a moderate amount generally reflects healthy economic growth. But persistently high levels of inflation can weaken consumer purchasing power and cut margins for businesses by depriving them of their pricing power.
Core inflation was buoyed in October by rising services and food prices and a smaller decline in the cost of retail and other goods.
Services costs rose at a faster pace due to pricier airfares and holiday expenses as border restrictions eased, while food inflation edged up as non-cooked food became more expensive.

Food prices have continued to climb every month on a year-on-year basis, even as core inflation was negative from February last year to January.
UOB economist Barnabas Gan said food prices are likely to inch up further if the Omicron variant triggers more supply chain disruptions.
"It might be somewhat similar to last year when Covid-19 was fresh in the picture. Back then, borders were closed and as a result, the prices of necessities, including food, were on the uptrend," he said.


But consumers might not feel the pinch of higher costs, added Mr Gan: "Omicron, which will likely be a growth dampener for the global economy, if not Singapore, will likely see some easing of energy prices... that could cushion food inflation in 2022."
He noted that the MAS tightened monetary policy in October and the gradually appreciating Singdollar could also help to cushion inflation, especially since Singapore imports most items, including food.

Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said food inflation has generally picked up due to greater demand.
"This is partly due to more people working from home and also cooking, especially during the circuit breaker period when restaurants were closed, but also as the economy recovers."
Supply factors like border closures, weather changes from seasonal and climate change, and supply chain bottlenecks have also contributed to inflation, she added.
The Straits Times has looked at how the prices of several grocery products have changed over the past five years or so to get a flavour of how inflation has affected the cost of everyday items.
It traced the monthly average retail prices of rice, sea bass, bananas, kailan and fresh milk from 2017 to October 2021 using Singapore Department of Statistics (SingStat) data.
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Analysts said the prices of these items have largely remained stable over the years despite some fluctuations.
They also noted that the re-basing of the Consumer Price Index (CPI) from the base year of 2014 to 2019 has resulted in a clearer picture of prices faced by consumers.
The index - which measures the average price changes of a fixed basket of goods and services commonly purchased by resident households over time - is re-based every five years to reflect the latest consumption patterns.

1. Rice​

Singapore imported US$277 million (S$378 million) worth of rice last year. PHOTO: UNSPLASH
Rice prices increased at an annualised rate of 1 per cent over the past five years, noted Assistant Professor of Finance Aurobindo Ghosh from the Singapore Management University's Lee Kong Chian School of Business.
The average retail price of 5kg of premium Thai rice - a long-time favourite of diners here - cost between $12.40 and $13.40 from January 2017 to April 2019.
Prices have generally risen to $13.20 or higher since then and crossed the $14 mark in April to June last year, peaking at $14.10 in May 2020, before falling.
Prof Ghosh said pandemic-induced travel and transportation restrictions, including during Singapore's circuit breaker, forced people to move indoors and created distribution bottlenecks: "This might have caused prices to go up due to supply chain issues."
Vietnam - the world's third largest rice exporter at the time - also implemented restrictions on its rice exports from late March to April 2020 to ensure it had sufficient domestic supplies to cope with the virus outbreak.
Singapore imported US$277 million (S$378 million) worth of rice last year, noted agriculture data platform Tridge.


Thailand supplied around 42 per cent of Singapore's total rice imports, followed by India at 22 per cent and Vietnam at nearly 19 per cent.
Singapore's Rice Stockpile Scheme ensures it has an adequate supply. It requires white rice importers to pre-commit the quantity they wish to bring in each month for local distribution.
They need to stockpile twice that amount in a government-designated warehouse, where rice can be kept for up to a year.

However, the scheme is unlikely to have a significant impact on prices, said Dr Cai Daolu, a visiting senior fellow at the National University of Singapore Business School.
"The global market for rice is highly competitive and Singapore is an open economy. Any surge in demand from Singapore can be met by global supply," he said.
"However, international prices of rice will increase if there's a surge of demand at a global scale."

2. Sea bass fish​

Singapore imported 100,264 tonnes of fish last year, up from 94,590 in 2019. ST PHOTO: LIM YAOHUI
Sea bass prices have ranged from $11 to as high as nearly $13 per kg over the past five years.
Prices declined around 1 per cent on an annualised basis from 2017 to 2021, noted Prof Ghosh.
Mr Marc Laurence, general manager for Singapore and South-east Asia at food logistics company Seafrigo, said that chilled seafood needs to be flown in and air freight rates have surged amid the pandemic.
"The prices of agricultural products will always be linked to the season, whether it's a good harvest or not," he added.
Singapore imported 100,264 tonnes of fish last year, up from 94,590 in 2019, according to Singapore Food Agency data.
Vietnam, Indonesia and Malaysia account for over 60 per cent of these fish imports.


Festive demand during periods like Chinese New Year can also result in higher prices, said Prof Ghosh.
The price of sea bass surged to $12.99 in February 2018, before falling sharply to $10.99 the next month.
Prices have generally hovered at over $11 since March last year but they rose above $12 again in August and October this year.

"Supply chain disruptions and higher fuel prices might have caused some price impact," said Prof Ghosh.
The temporary closure of Jurong Fishery Port in July and easing of Covid-19 curbs in August that saw more people dining out could have helped the increase, he added.

3. Bananas​

Bananas are among Singapore's top fruit imports. PHOTO: ST FILE
Bananas have hovered around $2.40 or more a kg since September 2019, up from $2.30 and above previously.
They rose by about 1 per cent annually over the past five years.
Bananas are among Singapore's top fruit imports, together with watermelons, papayas, navel oranges and Fuji apples.
There were 427,697 tonnes of fruit imported last year, down from 428,869 in 2019. Malaysia accounts for the lion's share of this, at 37 per cent.


Prof Ghosh said the prices of fresh fruit, including bananas, have risen amid supply chain disruptions coupled with greater demand as people adopt healthier lifestyles.
"Climate change also plays a significant role with more extreme weather patterns in many areas which grow bananas - typically in tropical areas like India, the Philippines and countries in Central and South America," he said.

Banana prices dipped in May 2020 to $2.25 before rising again.
Prof Ghosh said: "As banana is a perishable commodity, May and June 2020 might have seen excessive supply with producers expecting curbs due to the pandemic. This might have reduced the price."

4. Chinese kale (kailan)​

Singapore imported 80,434 tonnes of leafy vegetables last year, up from 78,354 in 2019. ST PHOTO: JASON QUAH
Kailan fell from around $6 a kg at the start of 2017 to about $5 in early 2019.
Singapore's move to diversify its import sources and an increase in local production have shored up the supply of kailan and helped to bring down prices, said Prof Ghosh.
Dr Cai from NUS said: "Kailan prices are quite stable, but so is the price of rice and bananas. Given that Singapore can source vegetables from different locations, seasonal changes have very little effect on the domestic market."


Kailan has generally hovered around $5.20 to $5.25 since February last year.
Local production in hydroponic urban farms helps to mitigate seasonal changes in supply, said Prof Ghosh, adding that locally sourced vegetables are more sustainable.
"It travels (a shorter distance) to your dinner table, so it costs less and retains quality better," he said, noting that kailan prices have fallen about 3 per cent annually since 2017.

Singapore imported 80,434 tonnes of leafy vegetables last year, up from 78,354 in 2019.
Malaysia accounted for 64 per cent of the imports, followed by China at 24 per cent.

5. Milk​

Singapore imports most of its dairy products from Australia, New Zealand and Thailand. PHOTO: ST FILE
Fresh milk had the largest price increase of the five items at nearly 4 per cent annually over the past five years.
"More discerning consumers are demanding organic milk sourced from places like Japan and Australia which is adding on to distribution cost. The cost of maintaining livestock might also add to the long-term price of fresh milk," said Prof Ghosh.
Singapore imports most of its dairy products from Australia, New Zealand and Thailand, according to Britain's Agriculture and Horticulture Development Board.


Mr Laurence from Seafrigo said the spike in freight prices has the largest impact on cheaper products like milk. "When we ship food that is already expensive and you add a bit of freight increase, the price increase is still manageable," he said.
"But on cheaper products, the freight has a huge impact."
Fresh milk prices rose to $3.20 a litre in January 2019, up from $2.70 to $2.90 previously.
They edged up further to $3.37 in April last year and have since remained around that level.
Prof Ghosh said: "With pandemic-related restrictions imposed in March 2020, supply disruptions due to the pandemic might have created bottlenecks for perishable products like milk. Prices stabilised as the restrictions were relaxed and alternative supply chains were established."

 

[laksaboy]

Our technocrats have attempted to cover their backside by releasing an infographic about inflation last year. I think that was unprecedented.

 

[Talking Donkey]

I just had a cup of milo kosong for $1.80ct at a kopitiam which i think is too much.

 

[LITTLEREDDOT]

I just had a cup of milo kosong for $1.80ct at a kopitiam which i think is too much.

For $1.80, you should keep the cup.

 

[LITTLEREDDOT]

Singapore inflation continues to climb in November, breaking October record​

Core inflation climbed to 1.6 per cent last month from 1.5 per cent in October. ST PHOTO: KUA CHEE SIONG

Prisca Ang

DEC 23, 2021

SINGAPORE - Prices in Singapore are rising more sharply than expected, with inflation at its highest in several years. Both bad news and good contributed to this.
The good news is that there is greater domestic demand for goods and services as the economy recovers. On the flip side, prices are also being driven up by rising import costs amid global transportation bottlenecks.
The prices are starting to rise after a spell that saw them fall amid plunging demand during the pandemic.
The Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said on Thursday that wages have increased and are expected to continue rising at a steady pace as slack in the labour market dissipates. This adds to both costs and prices.
The Republic’s overall and core inflation continued to climb in November, after both benchmarks hit their highest in several years the previous month.
Core inflation, which excludes rents and private road transport costs, climbed to 1.6 per cent last month from 1.5 per cent in October, amid rising services costs and is expected to rise further in the months ahead.
This is the indicator that better captures the underlying trend in consumer prices and the one that MAS monitors most closely.

Analysts polled by Bloomberg had expected core inflation to remain unchanged at 1.5 per cent. The last time the core inflation rate was higher was in March 2019, when it hit 1.7 per cent.
Overall inflation edged up to 3.8 per cent in November, from October’s more than eight-year high of 3.2 per cent. It outdid the 3.4 per cent forecast by analysts polled by Bloomberg.
MAS and MTI raised their overall inflation forecast for this year to 2.3 per cent, up from around 2 per cent previously, given the sharp rise in private transport costs in recent months due to higher certificate of entitlement (COE) premiums.

They kept their overall inflation estimate for 2022 unchanged at 1.5 per cent to 2.5 per cent.


UOB economist Barnabas Gan said this means the high inflation rate is likely to be temporary.
Headline and core inflation have both averaged 1.4 per cent over the past 10 years, he noted.
Private transport inflation rose to 17.9 per cent in November, from 14.3 per cent the previous month, on the back of a larger increase in car prices.
Electricity and gas costs also saw a steeper increase - of 10 per cent in November, compared with October’s 7.8 per cent - mainly due to a decline in the number of households on standard price plans for electricity as some retailers exited the market.
Services inflation edged up to 1.9 per cent, from 1.6 per cent in October, due to a faster pace of increase in airfares as border restrictions eased, and a smaller decline in telecommunication services costs.
Home rents rose, leading to accommodation inflation of 2.7 per cent, compared with October’s 2.5 per cent. Food inflation, likewise, climbed to 1.9 per cent in November, from 1.7 per cent the previous month.

However, the cost of retail and other goods fell more sharply - at 0.9 per cent in November, compared with October’s 0.4 per cent decline - due to a larger fall in the price of clothing and footwear.
Core inflation is officially expected to average 0.9 per cent for 2021 as a whole, and increase further to 1 per cent to 2 per cent next year.
MAS and MTI said: “Amid construction delays, accommodation inflation should remain firm and continue to support (overall) inflation in 2022. Meanwhile, private transport inflation is likely to moderate next year on the back of a slower pace of increase in COE premiums and petrol costs.”

 

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Forum: Feeling the pinch from rising prices of everyday food items​

Many common food items that have seen price increases or quantity reduction of more than 10 per cent. PHOTO: ST FILE


JAN 1, 2022

I am very concerned with the data released recently showing escalating food inflation.
Overall and core inflation continued to climb last month, after both benchmarks hit their highest in several years the previous month (Inflation in S'pore continues to rise, surpasses Oct highs, Dec 24).
According to Trade and Industry Minister Gan Kim Yong, food in Singapore is expected to become more expensive in the coming months as energy prices increase amid higher prices for global food commodities, supply chain bottlenecks and labour shortages (Food prices set to rise amid energy and supply constraints, Nov 4).
A trip to the supermarket for grocery shopping or to the coffee shop for a meal would show that the actual effect of food inflation might be worse than what it seems from the data.
I frequent a wonton noodle shop in my neighbourhood. The price has gone up by 50 cents, almost 15 per cent. But the portions of noodles and ingredients are much reduced.
The price of a container of cookies sold at a local retailer has risen from $5.50 to $7.90, a hefty 44 per cent increase.
The price of my favourite soya bean milk remains the same. But the cup size has become smaller - by about 25 per cent.

These are only some examples of the many common food items that have seen price increases or quantity reduction of more than 10 per cent.
To stretch their dollar value, consumers have to move to more affordable options.
The Government has said the goods and services tax (GST) hike would take place between next year and 2025, and sooner rather than later. And at least one analyst posits that the hike could come as early as the second half of next year.
I fear that food prices may be raised again, judging from past instances when proprietors used an increase in GST to justify a hike in prices.
Any additional increase would cause many consumers to have to source cheaper alternatives to fill their stomachs.
I dread to see the day when I have to pay $10 for a bowl of noodles that would not be filling even for a child.

Foo Sing Kheng

 

[LITTLEREDDOT]

Singapore reviewing 2022 inflation forecasts as consumer prices rise to new highs in December​

Core inflation was driven by a steep increase in air travel costs, official data showed. PHOTO: ST FILE

Ovais Subhani

JAN 25, 2022

SINGAPORE - Singapore consumer prices climbed to new highs in December, beating economists' forecasts and prompting the Government to review its inflation forecasts for this year.
Core inflation, which strips out accommodation and private transport costs, jumped to 2.1 per cent last month on a year-on-year basis - the highest since July 2014 - from 1.6 per cent in November. The increase was driven by a steep increase in air travel costs, official data showed on Monday (Jan 24).
A Reuters poll of economists had forecast a 1.7 per cent increase.
Headline or overall inflation rose to 4 per cent, up from 3.8 per cent in November and the most since February 2013 when it surged 4.9 per cent.
The increase beat economists’ forecast of 3.75 per cent and was due mainly to the pickup in core inflation and bigger housing rent increases.
The Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said the consumer price index (CPI) data "saw an upside surprise in airfares".
With the introduction of more vaccinated travel lane (VTL) flights, actual airfares were progressively incorporated into the CPI, compared with the previous approach of imputing them. December reflected both higher base airfares as well as the additional costs of mandatory Covid-19 tests, the agencies said.

Apart from airfares, point-to-point transport service costs, and tuition and other fees also rose at a faster pace, contributing to the 2.6 per rise in the cost of services.
"There remains significant uncertainty surrounding the outlook for inflation in the near term, including from the costs of air travel and commodity prices such as for food and oil," said MAS and MTI.
"Given the recent stronger-than-projected inflation out-turns, including the sharp uptick in airfares", MAS and MTI said they are reviewing their current 2022 forecasts for both overall inflation and core inflation.


However, full-year 2021 core and overall came in exactly as MAS and MTI had forecast - 0.9 per cent and 2.3 per cent respectively.
The surprisingly high inflation in recent months comes on the back of an equally strong economic recovery last year when the Singapore economy expanded by about 7 per cent - the most in 11 years.
While the economy is forecast to expand at a slower pace of 3 per cent to 5 per cent this year, falling unemployment and rising wages are likely to keep domestic demand for goods and services up.
Wages are also rising because border restrictions have cut the supply of foreign labour, used by employers here to compensate for domestic shortages.
Meanwhile, transport bottlenecks worldwide will also keep pushing up imported inflation for Singapore, which brings in almost everything it consumes.
The supply bottlenecks have been driving prices higher for a wide range of goods from crude oil to food and other products.
“Rising import and labour costs, alongside the recovery in domestic economic activity, will support a steady increase in core inflation in the quarters ahead,” MAS and MTI said.

In addition, construction delays will keep accommodation costs firm and continue to support the headline inflation in 2022, they noted.
“On the domestic front, the labour market recovery is expected to become more entrenched, with the easing of Covid-19 restrictions and a pickup in economic activity.”
Even as the domestic Covid-19 situation stabilises, consumer demand should strengthen, and allow businesses to pass on rising import costs to consumer prices, they said.
Analysts said the stronger-than-expected inflation will reinforce speculation that the MAS will tighten its monetary policy - strengthening the Singapore dollar versus currencies of its trading partners.
The next monetary policy statement (MPS) is due in April.
Ms Selena Ling, chief economist and head of treasury research and strategy at OCBC Bank, said; “At this juncture, the April MPS tightening is already baked into market expectations, so the upside CPI surprises may be more a question of whether it would heighten speculation of faster or more aggressive tightening at the upcoming April MPS.”
While MAS and MTI expect inflation to start easing gradually towards the end of the year, analysts said commodity prices - mainly oil and food - may turn out to be a wild card.

DBS Bank’s chief economist Taimur Baig said the crude oil benchmark trading at around US$90 per barrel should start to ease, given that both Opec and non-Opec nations are likely to increase their production this year.
However, the ongoing tension between Russia and the West over Ukraine threatens supply from the region. On the other hand, China’s monetary policy easing could cause a spike in fuel demand from its massive industrial sector.
Dr Chua Hak Bin, senior economist at Maybank Kim Eng Research, said the recent floods in Malaysia may compound food price increases in the lead-up to Chinese New Year on Feb 1.
Given the persistent inflationary pressures, Dr Chua expects MAS to raise its 2022 forecasts for headline inflation to a range of 2 per cent to 3 per cent and core inflation to 1.5 per cent to 2.5 per cent.
Analysts, however, do not expect runaway double-digit inflation in Singapore or elsewhere. They also do not see the current magnitude of price increases as a threat to the economic recovery.

 

[LITTLEREDDOT]

MAS' surprise policy move seen as attempt to manage inflation expectations, defend purchasing power​

Ovais Subhani

A stronger Singapore dollar will help the most with food and energy prices, which have been on the rise. ST PHOTO: LIM YAOHUI


JAN 25, 2022


SINGAPORE - Of all the economic variables, inflation is the trickiest one for policymakers to manage.
Inflation rises when demand outstrips supply. That usually means the economy is doing well and more people are buying goods or paying for services.
But not everyone benefits the same way, even in a growing economy.
The first sign of a significant jump in consumer prices usually sets off a torrent of alarming news headlines and social media blogs hammering the rising cost of living.
The fear-mongering turns inflation and its damaging impacts on livelihoods into a self-fulfilling prophecy by fuelling even more price gains.
Economists refer to the phenomenon as "entrenched inflation expectations".
What happens is that the fear of higher prices prompts people to start hoarding non-perishable supplies and buy big-ticket items, from televisions to cars, earlier than they may have planned.

Hence, central banks - most of whom are mandated to manage inflation - take these expectations very seriously.
A few months of higher-than-expected consumer price gains in Singapore last year raised the threat of inflation expectations going haywire and becoming entrenched.
And that is probably why Singapore's central bank came out with an unscheduled monetary policy statement on Tuesday (Jan 25). The Monetary Authority of Singapore (MAS) also raised its forecast for inflation this year.

The MAS tightened its monetary policy stance to help strengthen the Singapore dollar and buffer the impact of imported inflation.
Singapore imports almost everything it consumes, and thus MAS manages monetary policy through exchange rate settings rather than interest rates.
So a stronger Singapore dollar will defend the purchasing power of Singaporean consumers and businesses against rising import costs.
That will help the most with food and energy prices, which have been on the rise mainly due to transport bottlenecks and supply and demand mismatches as countries continue to impose snap lockdowns to manage the Covid-19 pandemic.

The new inflation forecast should cap expectations of how high inflation can go. Economists refer to it as "anchoring of inflation expectations".
The unexpected policy tightening, ahead of the scheduled monetary policy statement in April, will in addition raise confidence that the central bank is ready to act whenever it needs to.
Such policy credibility is needed, given the risk of further price gains amid an uncertain global growth outlook.
Mr Rob Subbaraman, a Singapore-based economist at investment bank Nomura, said: "We are in uncharted territory."
He said it is doubly difficult to gauge growth and inflation because of the unusual impact of the pandemic, hitting the demand and supply sides of the economy simultaneously.

As the Covid-19 threat recedes in countries with high rates of vaccination, economic reopening boosts demand. The demand is also powered by unprecedented fiscal spending by governments worldwide.
But the rolling supply disruptions - from microchips and logistics to energy and labour - have not been fully resolved.
The MAS in its statement on Tuesday said it continues to believe that the domestic economy will become more broad-based as Covid-19-related curbs are relaxed.
It kept its forecast of the economy growing at 3 per cent to 5 per cent, which is higher than the five-year average before the pandemic.
The economy grew by about 7 per cent in 2021.

A second year of above-trend growth means the output gap will turn slightly positive - contributing to inflation.
A positive output gap occurs when actual production exceeds full-capacity output. This happens when demand is very high and, to meet that demand, factories and workers operate far above their most efficient capacity.
There are more factors boosting inflation.
The domestic labour market has tightened, with the resident unemployment rate now close to its pre-pandemic level and wage growth above its historical average, the MAS said.

Part of the labour market tightening is also due to border controls that have restricted the flow of foreign workers.
Vaccinated travel lanes brought some relief on that front, but airfares increased sharply, mostly reflecting the cost of Covid-19 testing requirements for international travel, boosting inflation in their wake.
Analysts said more tightening by the MAS is still likely in April. The Government has already announced its intention to tighten fiscal policy by raising taxes, including the goods and services tax (GST).
Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said 2022 will be a year of double tightening for Singapore as both fiscal and monetary policy levers will grind tighter.

"At the upcoming Budget 2022, the highly anticipated 2 percentage point GST hike, potential additional wealth taxes and a carbon tax hike are likely to be announced. How these measures could influence consumption and inflation expectations remains uncertain," she said.
However, some observers are betting that if inflation pressures remain elevated and the economic recovery is uneven across different sectors, policymakers may decide to raise the GST at a later date.
Ms Yun Liu, an economist at HSBC bank, said: "We believe the GST hike will come in two steps: one in 2023 and another one in 2024, giving the authorities some flexibility, particularly in the face of lingering Omicron variant uncertainty."

 

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Pomfret going for as high as $100 a kg as some fish prices double ahead of CNY​

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Customers buying fish from a seafood seller at Clementi 448 Market and Food Centre, on Jan 26, 2022. ST PHOTO: LIM YAOHUI

Customers queuing to make payment for their purchases at Ghim Moh Market and Food Centre on Jan 26, 2022. ST PHOTO: LIM YAOHUI

Isabelle Liew and Cheong Chee Foong

JAN 26, 2022

SINGAPORE - Prices of some popular fish, such as Chinese pomfret and red grouper, have spiked ahead of Chinese New Year, with some sellers at wet markets doubling their prices.
The Straits Times visited six wet markets on Wednesday (Jan 26) and found that Chinese pomfret was selling for as high as $90 to $100 a kg, up from $40 to $50 a kg last November. Red grouper was priced at up to $75 a kg, from $30 to $40 a kg in November.
While the fish merchants association said the price increase is normal during the Chinese New Year period, stallholders said the increase is exacerbated by floods in Malaysia last month. Vendors added that suppliers in China have also been snatching up stocks.
Singapore's fish supplies come mainly from Malaysia, Indonesia and Vietnam.
Fishmonger Michael Yak, 47, who runs a stall at Tiong Bahru Market, said: "The price increase can't be helped. The floods in Malaysia last month affected supply and quality. Most of the stocks were also bought up by China."
The other markets ST visited were: Clementi 448 Market and Food Centre, Toa Payoh West Market and Food Centre, Ghim Moh Road Market and Food Centre, Tekka Centre and Chinatown Complex.
A 70-year-old stallholder at Tekka Centre, who wanted to be known only as Mrs Yang, raised the price of Chinese pomfret from $30 a kg last month to the current $70 a kg. She is selling red grouper at $45 a kg, up from $30 before.

"As supply is low, customers must order these fish in advance," she said. Walk-in customers may not get what they want, she added.
Mr Ang Jwee Herng, president of the Singapore Fish Merchants' General Association, said that the two types of fish are typically around 50 per cent more expensive in the lead-up to Chinese New Year due to high demand.
"These are the most popular types of fish during the Chinese New Year period, so there's increased demand. It isn't any different from previous years," he said.

Seabass and golden pomfret for sale at Clementi 448 Market and Food Centre on Jan 26, 2022. ST PHOTO: LIM YAOHUI
Meanwhile, fishmongers said the price of other fish like rabbitfish and marbled goby may fluctuate depending on their quality.
Mr Yak's prices for the two types of fish remained stable at $40 a kg.
But the price of rabbitfish dipped at BM Seafood in Ghim Moh. Fishmonger Lee Kok Weng, 33, who works there, said: "At the start of the month, rabbitfish was $30 a kg because the quality was good. But the stocks this week are quite normal, so we lowered the price to $26 a kg." The price of marbled goby at his stall remained the same at $45 a kg.
Madam Irene Lim, 64, a legal secretary who was shopping at Ghim Moh, said: "I buy fish only during festive seasons, so the price increase is acceptable to me especially when businesses at markets have been affected (by the pandemic)."
The price of prawns hovered at around $20 a kg. A market vendor at Toa Payoh West was selling prawns at $25 a kg, up from $20 a kg last month, while a vendor at Clementi was selling them at $20 a kg, up from $15 a kg last month.

Vegetable prices also continued to creep up.
Mr Jerry Tan, vice-secretary of the Singapore Fruits and Vegetables Importers and Exporters Association, noted that the lack of workers in Malaysian farms meant that vegetable prices are prone to fluctuation.
He said: "It's harder to tell for vegetables like tang oh and Chinese cabbage, but tomatoes from Malaysia are priced on the high side at the moment due to labour shortage. Some importers have turned to Thailand for supplies."

Customers buying vegetables at Ghim Moh Market and Food Centre on Jan 26, 2022. ST PHOTO: LIM YAOHUI
About 64 per cent of the 80,434 tonnes of leafy vegetables Singapore imported in 2020 came from Malaysia, with the rest coming mainly from China and Thailand.
Mr Mic Ng, 42, who runs a vegetable stall at Clementi, increased the price of tomatoes from $2.50 to $3.50 a kg.
He said: "Last month, I already increased the price of tomatoes from $1.50 a kg to $2.50. Now, I have to raise prices again but it can't be helped - stocks are still affected by the aftermath of the floods in Malaysia and manpower issues."
Mr Ng also raised prices of other vegetables like spinach and Chinese cabbage by between 50 cents and $3 a kg.

Madam Tan Ah Sim, 63, who runs a vegetable stall at Ghim Moh with her husband, increased the price of tang oh from $8 a kg last week to the current $10 a kg. She is selling spinach at $10 a kg now, up from $7 last week.
"Business is bad and we're quite stressed. There are fewer customers compared with last Chinese New Year, and our profit margin is not a lot," she said.
But a 75-year-old stallholder at Tiong Bahru, who wanted to be known only as Madam Goh, said she did not raise the prices of all her vegetables despite suppliers increasing prices by 30 per cent.
Madam Goh is selling spinach at $8 a kg, tomatoes at $3.50 a kg, and long beans at $5 a kg.
"We absorbed the costs because if we were to increase, no one would buy," she said.

Customers buying vegetables from a stall at Tiong Bahru Market, on Jan 26, 2022. ST PHOTO: LIM YAOHUI
A spokesman for supermarket chain Sheng Siong said on Wednesday that the price of Chinese pomfret and red grouper increased by 10 per cent to 15 per cent due to high demand.
“We have kept the prices for most of the seafood items stable,” she said, adding that weather conditions affected supply.
Vegetable prices have also increased due to higher freight and labour costs, but the spokesman said it will be offering “attractive promotions” during the festive period.
A FairPrice spokesman added that prices of seafood and vegetables have generally remained stable, but the price of Chinese pomfret and red grouper increased by about 15 per cent.
It will continue to diversify sources for fresh produce by working with local farms and overseas suppliers.
A spokesman for DFI Retail Group, which runs Giant, said that sales of Giant’s Lower Prices That Last range increased by 50 per cent over the last four weeks.
The range includes fish like golden pomfret, which is going for two for $6, and vegetables like chye sim and round spinach, which is sold at $2 for any three types.
The spokesman did not elaborate on overall prices of fish and vegetables.

 

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Inflation puts pressure on prices of Chinese New Year goodies​

Shipment charges per container from China have more than doubled during this Chinese New Year period.
ST PHOTO: FELINE LIM
Chin Soo Fang


JAN 9, 2022

SINGAPORE - Be prepared to pay more for Chinese New Year goodies even as businesses try to absorb the higher costs from inflation and patchy global supply chains.
Prices of canned abalone and mushroom from China have climbed by more than 10 per cent mainly due to lower production caused by Covid-19 lockdowns and an energy crunch.
There is also a shortage of premium scallops from Japan and larger abalones from Australia as divers scale back their work during the pandemic.
The cost of fish maw has spiked by over 20 per cent due to higher labour and power expenses while the majority of Chinese herbs from China are priced 20 per cent more.
Shipment charges per container from China have, meanwhile, more than doubled during this Chinese New Year period.
Most of the businesses that The Straits Times spoke to are hoping to keep a lid on prices via measures such as bulk buying, and, for a hotel, even harvesting produce from its own farm.
Ms Serene Seow, managing director of Eu Yan Sang Singapore, which has seen healthy sales for abalone and birds' nests, said it has been absorbing cost hikes since the pandemic started two years ago.


At Hockhua Tonic, general manager James Teo said the price of wolfberries used in many Chinese dishes has gone up by 10 per cent, but the company's close relationship with a supplier from China and bulk orders have ensured stable prices.
However, the cost of chrysanthemums has jumped by over 30 per cent, and he has had no choice but to raise the selling price by 10 to 15 per cent.
For those who flock to nurseries to stock up on festive plants, options like pussy willow and lucky bamboo are 10 to 20 per cent pricier on average.

To maintain customer goodwill, Mr Vincent Chew, retail manager with Homegrown By BNC in Trengganu Street, said it is taking profit cuts to maintain prices of its plants.
Mr Peter Cheok, Far East Flora's sales and marketing director, said it will try to prune cost increases for festive favourites like the Four Season Lime and Peach Blossom, as well as prosperity gifts like Table Gardens, Phalaenopsis and Cymbidium arrangements.

Prices of festive plants have also risen. PHOTO: SHIN MIN DAILY NEWS
In the food and beverage arena, some establishments and caterers are changing menu items and ingredients to cope with uncertain supplies and soaring prices.
But bigger brands like Putien and Neo Group have built a buffer over the years, with their local or regional supply and trading arms able to deliver consistency in cost and supply.
Mr Gino Tan, country general manager at The Fullerton Hotels and Resorts, said it has turned to locally sourced ingredients and organic produce from its own Fullerton Farm at its hotel.
Smaller businesses facing the cost brunt are cutting stock orders.

Madam Lisma Lim, 65, who runs the Indo Sumatra stall at Chinatown Street Market, has halved the quantity of her love letters and other products from Indonesia.
Orchid Chopsticks in Pagoda Street has also reduced its stocks by 50 per cent, with paper decorations from China costing about 15 per cent more.
Shop owner Cindy Zhao is absorbing the higher charges for her customers, who are mostly regulars. She placed an order four months ago but the items arrived only at the end of last year due to shipment delays.
She and her staff had to work till midnight to sort and display the goods quickly.
"I am already very lucky, as I know of others who are still waiting for their festive stocks," the 52-year-old said. "Can you imagine the stress of getting your stocks only weeks before Chinese New Year, or even after that?"

 

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What is inflation and why are prices rising?​

Inflation in Singapore climbed to new highs in December, prompting the Government to review its inflation forecasts for 2022. PHOTO: ST FILE

Prisca Ang

FEB 5, 2022

Inflation is once again on the rise around the world and Singapore has not been spared. The Straits Times answers three big questions about the forces driving up prices.
Baking a cake or making a cup of tea has become more expensive over the years if you use fresh milk.
A litre of it cost around $2.80 five years ago, but it cost about $3.20 three years ago and nearly $3.40 last year.
The same effects can be seen in a range of other products and items, from food to electricity, in recent months owing to both local and external factors.
Inflation refers to a general rise in the prices of goods and services without an improvement in their quality. It also excludes seasonal price gains such as those during the Chinese New Year period.
There are two main causes of inflation: demand-pull and cost-push. The first is the most common and occurs when the demand for goods and services in an economy rises more rapidly than the capacity to supply them.
Cost-push inflation happens when the cost of production and raw materials increases due to reasons such as short-term supply shocks.

Inflation in Singapore climbed to new highs in December, beating economist estimates and prompting the Government to review its inflation forecasts for this year.
Headline or overall inflation stood at 4 per cent - the most since February 2013 when it surged to 4.9 per cent.
Core inflation came in at 2.1 per cent - the highest since July 2014's 2.2 per cent. This indicator strips out accommodation and private transport costs, which tend to be volatile, and better captures the underlying trend in consumer prices.


Inflation is not necessarily bad - a moderate amount of it encourages consumption and investment.
People will buy big-ticket items if they think prices will rise if they wait too long. Likewise, businesses will invest in equipment and land if they expect higher asset prices and they will boost hiring if they view an increase in wages.
The Monetary Authority of Singapore notes that on average, a core inflation rate of just under 2 per cent is close to the historical mean and consistent with overall price stability in the economy.


Singapore recorded 12 consecutive months of negative core inflation - or prices that were lower than a year ago - amid the Covid-19 outbreak. The spell was broken in February last year.
On the flip side, persistently high levels of inflation can weaken consumer purchasing power and cut margins for businesses by depriving them of their pricing power.
December's inflation was mainly driven by a sharp uptick in airfares owing to higher base fares and additional costs of mandatory Covid-19 tests for vaccinated travel lane flights. The increase buoyed services inflation.
Inflation has also been helped by other factors: increasing consumption from recovering economic activity worldwide; supply disruptions from the likes of congested ports and severe weather events; and rising wages as the labour market strengthens.
Businesses may defend their market share by choosing to absorb all or part of the additional costs increases, but they might have to raise prices if inflation remains high or continues to rise.

 

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Does inflation mean consumers have to keep paying more?​

Controlling spending and focusing more on needs are essential at such uncertain times. PHOTO: ST FILE

Prisca Ang
FEB 5, 2022

SINGAPORE - Inflation does not mean consumers have to accept higher prices and resign themselves to having lower purchasing power.
Hedging against inflation is easier said than done but people can take a multi-pronged approach to protect themselves, said Singapore Management University (SMU) assistant professor of finance Aurobindo Ghosh.
Controlling spending and focusing more on needs are essential at such uncertain times, he noted, adding that it is important to understand saving and investment needs. "There is a need to have access to emergency funds but, beyond that, savings should be prudently invested in a diversified asset portfolio."
Prof Ghosh, who is also director of the Citi Foundation-SMU Financial Literacy Program for Young Adults, said that people could also pay back debt that carries higher interest rates and refinance loans before rates go up further.
People are already finding ways to make their dollar stretch.
Education-sector worker Huang Jia Li has cut back on food deliveries, opting instead for home-cooked meals or takeaways from hawker centres.
She also tries to take the bus or train where possible instead of a cab or private-hire car.

"Aside from tightening our belts, I am opting for a regular forced savings model and just bought an insurance policy where its main purpose is to grow one's savings," said Ms Huang, 49.
"A small percentage of my salary is deducted every month and channelled into this savings plan."
Research engineer Muhammad Adri Abu Bakar, 31, is also taking on inflation: "At one point, I was investing up to 70 per cent (of my income) in a wide range of assets like funds, equities and an endowment plan, but not anything high-risk."

He has since increased his savings so he has cash on hand to foot the down payment on his own home after his rental lease ends.
Sharing a flat with two friends has also helped to reduce his rent from $850 - when he previously rented a room by himself in the same area - to about $750.


However, it is not entirely up to consumers to figure out how to cope with rising prices.
Singapore has a small and open economy where almost 40 cents of every dollar spent domestically go to imports.
The Monetary Authority of Singapore (MAS) manages the exchange rate, which allows it to keep a lid on imported inflation.
With inflation rising faster than expected, the central bank took the unusual step last month of tightening its monetary policy stance in between its regular policy meetings, which occur in April and October.
It took the first step last October when it shifted to a gradual appreciation path for the Singdollar, from zero per cent previously.
A stronger Singdollar dampens the inflationary impact of higher import prices.
Most economists reckon that MAS is not done with tightening yet and expect another move in April.

The Government has also given assistance through the likes of Goods and Services Tax (GST) Voucher - U-Save rebates of up to $595 last year to help with household utility bills.
It also said the impact of the upcoming GST hike - from 7 per cent to 9 per cent - will be delayed for the majority of households in Singapore through the $6 billion Assurance Package, which will be disbursed alongside the GST increase.
More details about the hike are expected to be announced at the upcoming Budget.

 

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Amid inflation, why are prices up more for some groups of people?​

Food prices rose 2.1 per cent last December compared with the same month a year earlier. PHOTO: ST FILE

Prisca Ang

FEB 5, 2022,

SINGAPORE - Horticulturist Loo Jun Liang only has to look at the small amounts he forks out daily to see how big the threat of inflation is looming in his life.
Take mee pok at a coffee shop near his home. That used to be $3 but has cost $3.50 since last December, while sweet treats like Coolish ice cream is now $2.50 at supermarket chain Don Don Donki, up from $1.90.
It might be only a few cents here and there, but Mr Loo, 25, is concerned: "I'm still able to cope with the higher prices but they make me worry about the future when I have to buy my own home."
There are plenty of consumers like him who are also feeling the pinch of rising prices, with some experiencing the sting more keenly than others, depending on what they buy.
Someone who tends to buy more clothes might have found cheaper items amid declining prices of retail goods, but if food takes up a larger share of their budget, they are likely more aware of inflation.
Food prices rose 2.1 per cent last December compared with the same month a year earlier, largely due to costlier non-cooked items.
They were also up 1.9 per cent in November and 1.7 per cent in October.

Ms Huang Jia Li has noticed pricier fast food in recent years. She recalled how a two-piece chicken meal at KFC was $8 in 2019 but now costs $10.60.
And her monthly utility bill rose to $250 in the last quarter of 2021, up from $235 previously.
"I'm still managing as I'm in full-time employment and so is my elder daughter who lives with me, but we try to cut back on luxuries like food deliveries," said Ms Huang, who is 49 and works in education.


Electricity and gas have seen sharper hikes since October amid a global energy crunch.


Prices surged 10.7 per cent in December, up from November's 10 per cent increase and October's 7.8 per cent rise.
West Coast GRC MP Ang Wei Neng said residents have complained that higher electricity costs are hurting their pocket, and some also reported an increase in food and coffee prices.
"Hawkers are experiencing an increase in utility and raw material prices, as well as higher manpower costs. Quite a number of stalls have thus increased the selling price," he added.
The impact of inflation also varies across households with differing incomes.
The lowest-income group saw the smallest increase in consumer prices in the second half of last year, compared with those from the middle and higher income groups, noted Department of Statistics data.
Overall inflation for those whose household incomes were in the lowest 20 per cent bracket rose 2.4 per cent year on year.
This compared with 2.7 per cent for the middle 60 per cent in household income and 3.7 per cent for the highest 20 per cent.
Rising car and petrol prices had less impact on those in the lowest 20 per cent of household incomes as these items made up a smaller share of their expenditure.
Singapore Management University assistant professor of finance Aurobindo Ghosh noted that inflation of essential items was higher for those from the lowest 20 per cent bracket.
Food inflation was 1.8 per cent for that group, compared with 1.7 per cent for the middle 60 per cent and 1.6 per cent for the highest 20 per cent.
Housing and utility prices rose 3.2 per cent for those from the lowest income bracket, versus 2.8 per cent for the middle income and 2.1 per cent for the highest income groups.
MORE ON THIS TOPIC
MAS tightens Singdollar policy for second time in 3 months to counter inflation
S'pore does not expect persistent, accelerating inflation: Low Yen Ling
"The lowest quintile group might suffer the most from rising prices as a greater proportion of their budget is spent on essential items," said Prof Ghosh, adding that they have less savings and investment to mitigate inflation.
Pricier fuel and distribution costs, as well as a stronger US dollar, which means costlier items like oil, have created a perfect storm, sending food and energy prices up, he noted.
He said: "The main tool to counter inflation that the lowest-income group has is reducing discretionary spending."

 

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Electricity, gas tariffs to increase for next three months amid rising costs​

A global fuel shortage has been nudging up the prices of electricity over the past few months. ST PHOTO: CHONG JUN LIANG

Shermaine Ang


DEC 30, 2021

SINGAPORE - Most households will see higher electricity bills for at least the next three months, with the electricity tariff for the next quarter going up by 5.6 per cent on the back of rising fuel prices.
The electricity tariff for the period Jan 1 to March 31 will be 25.44 cents per kilowatt-hour (kWh) excluding the goods and services tax, said grid operator SP Group on Thursday (Dec 30). This is up from the current rate of 24.11 cents per kWh.
SP Group said households living in a four-room Housing Board flat – which typically consumes about 354 kWh of electricity a month – can expect their average monthly electricity bill to go up by $4.70.
A global fuel shortage has been nudging up the prices of electricity over the past few months.
About 95 per cent of Singapore’s energy mix comes from natural gas, all of which is imported into the country via pipes from its neighbours or in liquefied form from all over the world.
But there are a number of factors that are affecting the supply of gas into Singapore and causing prices to spike.
For instance, pandemic-recovery economic activity and countries entering the cooler seasons are nudging up demand for the gas.

Electricity tariffs in Singapore are calculated from four components.
Fuel costs – or the cost of imported natural gas – make up about half of the tariff. The rest covers other costs related to activities such as maintenance of power plants, meter-reading and transporting electricity through the grid.
The regulated electricity tariff set by SP Group is reviewed each quarter, and approved by the Energy Market Authority (EMA).

SP Group said imported natural gas prices are indexed to oil prices.
The grid operator added in a statement: “Over the past few months, a confluence of recovering economic activity, severe weather events and a series of gas production outages have sent global energy market prices significantly higher. These factors have raised electricity prices in many markets.”
Energy economists say the elevated electricity prices could last for at least the next half a year.

Dr David Broadstock, a senior research fellow at the National University of Singapore’s Energy Studies Institute, expects high prices to persist for at least the next six months.
The energy economist said economic uncertainty triggered by a renewed round of lockdowns in response to the Omicron variant could keep prices elevated.
“Supply chains for varying energy usage levels were not designed to scale up and down with the scale and frequency that economies are closing down and opening up, creating room for short-lived but significant supply and demand imbalances,” Dr Broadstock said.
He said higher energy prices can affect all goods and services, but added that while high prices may persist for some time they will not go on indefinitely.

OCBC Bank economist Howie Lee said the high oil prices may continue into 2023.
"High oil and gas prices drive up the costs of production and there will be secondary pass-through effects on prices of goods and services if oil prices remain elevated," said Mr Lee.
Mr Ang Yuit, vice-president of the Association of Small and Medium Enterprises (ASME), said electricity prices are one of the rising costs during the pandemic which businesses have to deal with, and would likely be passed on to consumers.
Meanwhile, gas tariffs for households will also increase in the coming quarter.
They will go up by 1.17 cents per kWh in a 6.1 per cent increase, said City Energy, the producer and retailer of piped town gas here.
Excluding GST, the rate will increase from 19.04 cents per kWh to 20.21 cents per kWh from Saturday to March 31. With GST, the rate will be 21.62 cents per kWh.
The increase is due to higher fuel and non-fuel costs compared with the previous quarter, said City Energy.

Financial adviser Chia Xian Min, 32, who lives in a five-room flat with her husband, two sons – one aged 10 months and the other two years – and a helper, said it is a big increase in her household’s utilities bills as 5.5 per cent is even higher than inflation.
“But I won’t change the way I use appliances just yet because electricity is a necessity and what needs to be done, needs to be done. If there are alternatives to cut usage we would do it, but right now, for a household of five, there are just too many appliances we need to use.”

 

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Managing the pressure of inflation: How bad will it get and should you be worried?​

The core inflation rate hit 2.1 per cent last December, year on year. ST PHOTO: DESMOND WEE

Tham Yuen-C
Senior Political Correspondent

FEB 9, 2022

SINGAPORE - Despite efforts to bring down prices, inflation has continued to rise.
The core inflation rate, which the Government has said is a more accurate gauge for locals, hit 2.1 per cent last December, year on year.
This is up from 1.6 per cent in November and 1.5 per cent in October, the month when the Monetary Authority of Singapore (MAS) raised the slope of its currency policy band to strengthen the Singdollar.
Around the world, prices are rising, putting governments under pressure.
In Singapore, Leader of the Opposition Pritam Singh highlighted the issue in his New Year's Day message, describing cost of living as a likely "major pressure point for many Singaporean households" in the year ahead.
Citing higher costs of many basic needs such as utilities, transport and medical insurance, he pledged that the Workers' Party will track what the Government does to support Singaporeans who need the most help.
MPs, too, have asked in Parliament for the Government to do more.

​

On Thursday (Feb 3), Finance Minister Lawrence Wong reiterated that the Budget will help Singaporeans manage concerns over the cost of living.

How bad will it get?​

Economists say the situation is set to get worse before it gets better.
OCBC Bank's head of treasury and research Selena Ling reckons that core inflation may hit 2.8 per cent and stay at this elevated rate for most of the year.

MAS recently reviewed its initial core inflation forecast of 1 per cent to 2 per cent and bumped it up to 2 per cent to 3 per cent.
While this is nowhere as high as the core inflation of 6.5 per cent reached in 2008, Singapore has not seen such a rapid increase in prices since 2013 and 2014.
Price pressures may worsen as the recovery from the pandemic spurs demand, and a manpower crunch - due to border restrictions - pushes up wages, she adds.
Meanwhile, as factories roared back to life, the world experienced its biggest ever increase in electricity demand last year, pushing energy prices to record highs. The International Energy Agency expects the situation to persist for another three years.
Minister of State for Trade and Industry Low Yen Ling told Parliament last month that the Government expects global energy prices and bottlenecks in global transportation to ease gradually over the course of the year, meaning prices should come down.
MORE ON THIS TOPIC
What is inflation and why are prices rising?
S'pore reviewing 2022 inflation forecasts as consumer prices rise to new highs in December

Why is it a concern?​

Inflation has different implications for different income groups.
Typically, those in the lower-income groups are the most squeezed when prices soar.
Spending on food makes up the bulk of their household expenditure, and with grocery prices rising, they will find themselves counting the cents to decide whether to purchase a bunch of kai lan or chye sim.

Singapore Management University law don Eugene Tan says low-wage earners, retirees, the sandwiched class and those reliant on the gig economy may find it hard to cope with the higher prices of essential items.
"Taken together, they are a large enough group to weightily add to the overall societal worries and unhappiness," he adds.
But MPs say that much of the impact on the bottom 20th percentile of households is offset by government handouts, such as U-Save rebates of up to $595 to help cover utilities bills and public transport vouchers of $30 each to help with transport costs.
There is also income support, such as Silver Support of between $720 and $3,600 per year for seniors who had low incomes in their working years, and the Workfare Income Supplement of up to $4,000 per year in cash for lower-wage workers.
Meanwhile, the middle-income earners could find their purchasing power eroded.

National University of Singapore (NUS) sociologist Tan Ern Ser says inflation may hit some middle-income Singaporeans "geared up to live the Singapore Dream".
He cites how they may find big- ticket items like cars and homes - whose prices have been rising - edging beyond their reach.
"I reckon the middle class would have to learn to live within their means and, for those married, to stay the course of being high-earning dual-income couples," says Associate Professor Tan.
Former People's Action Party (PAP) MP Inderjit Singh, who was in Parliament from 1997 to 2015, warns of political implications.
"It will hit the middle-income group the most and when it does, these are the swing voters who can make a difference at a general election," he says.

What price to pay?​

The link between rising prices and their political fallout has been seen globally.
In the US, where inflation has hit 7 per cent, political watchers are already predicting that it will become a political problem for President Joe Biden during the mid-term elections to be held in November.
While Singapore did not experience runaway inflation before the 2011 General Election, SMU's Prof Tan and NUS' Prof Tan say cost-of-living issues had contributed in part to the ruling PAP's worst showing since independence.
"Not doing enough to deal with inflation can be regarded as being indicative of the government's tone-deafness to the average person's daily concerns," says SMU's Prof Tan.
MPs such as West Coast GRC's Mr Ang Wei Neng have heard residents complain about the higher electricity bills and more expensive hawker food.
To help residents who cannot cope, he has raised $100,000 for food for 200 vulnerable households. Children from rental flats get vouchers of up to $60 to join a tuition programme.
Meanwhile, raising wages is the key to helping the middle-income earners, who typically do not qualify for much government aid, says Bukit Panjang MP Liang Eng Hwa. He adds that there has to be sufficient subsidies to help this group afford housing, education and healthcare.

In fact, Singapore University of Social Sciences' associate professor of economics Walter Theseira says the combination of inflation and stagnant wages is the real issue.
It can be overcome if firms do well and raise wages soon. "People will grumble, but in six months to a year, nobody will say much any more because they are enjoying real wage growth," he adds.
Even after accounting for inflation, workers enjoyed real wage growth last year, with real median income of full-time employed residents rising 1.1 per cent, and for those at the 20th percentile, rising 4.6 per cent in 2021, Ms Low told Parliament.

Impact of GST hike​

Price spikes caused by external factors are not the only concern. The impending hike in goods and services tax (GST) also looms large.
Prime Minister Lee Hsien Loong said during his New Year's Day message that the upcoming Budget will have to "start moving" on the matter, first announced in 2018 and due to take place by 2025.
Sengkang GRC MP Jamus Lim, from the Workers' Party, citing the experience of Japan, said in a Facebook post last month that the GST increase from 7 per cent to 9 per cent could "add fuel to the fire", sparking inflation and stalling gross domestic product growth.
Indeed, inflation could get worse, says Ms Ling, if companies start to price in a more than 2 percentage point increase in prices.
Companies that could not pass on their higher operating costs to consumers over the past two years may do so now due to the better economic conditions, she adds.
At the same time, if consumers expect prices to rise faster, they could also start hoarding, driving up prices even more.
Prof Theseira says that regardless of whether this eventually plays out, there will be the inevitable perception that the increase in GST will fuel higher prices.
He puts it down to this: "People don't like the idea of government policies further increasing prices at a time when they feel prices are already rising faster than they can cope with."

Mr Liang believes that the $6 billion Assurance Package set aside will go some way in addressing people's concerns, since it will stave off the tax increase for five years for most households and 10 years for lower-income households.
"What's important is that this offset helps to safeguard the purchasing power of Singaporeans," he says.
Prof Theseira says that any economist would generally agree with the Government's approach of raising the GST while providing the Assurance Package to mitigate the impact on lower-income earners.
The problem is that many people will not make the connection between the offsets and the price increases, since sticker shock hits immediately, but such subsidies typically get deposited into people's bank accounts once a month.
But Prof Theseira says he is not in favour of a delay, which will just kick the can down the road.
Instead, he suggests that the GST hike be packaged with other tax increases such as for wealth taxes, for instance.
"My view is that the GST increase can be packaged with other tax adjustments so people can see that we are collecting from groups that have benefited a lot from the last couple of years," he says, citing studies that show those in the top income groups have benefited the most from Covid-19.

 

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Singaporeans expect inflation to rise to 2.2% this year with Covid-19 recovery prospects​

With the economic fallout from the pandemic, headline inflation trended negative for most of last year. ST PHOTO: KUA CHEE SIONG
Ong Sing Yee

JAN 21, 2021


SINGAPORE (THE BUSINESS TIMES) - Singaporean households polled last month see overall or headline inflation rising to 2.2 per cent this year from the 1.9 per cent in a September poll, according to a quarterly survey released by DBS Bank and the Singapore Management University (SMU) on Thursday (Jan 21).
December's figure is slightly higher than September's 1.9 per cent, which has been the lowest point polled since the inception of the Singapore Index of Inflation Expectations (SInDEx) survey in 2011. It is also lower than the fourth-quarter average of 3.2 per cent from 2012 till 2019.
With the economic fallout from the pandemic, headline inflation trended negative for most of last year. The decline eased to minus 0.1 per cent in November, from minus 0.2 per cent the previous month. The Government expects headline inflation to range between minus 0.5 per cent and 0.5 per cent this year.
In a joint statement, DBS and SMU said some semblance of normalisation and global cues of recovery with the advent of vaccines might have buoyed inflation expectations.
Assistant professor of finance Aurobindo Ghosh of SMU's Lee Kong Chian School of Business, who is head of the SInDEx survey, said the availability of vaccines has led to a belief that the end of the pandemic could be drawing near.
He added that the signing of the Brexit deal, a change in the regime in the United States and the Regional Comprehensive Economic Partnership treaty have resulted in renewed prospects of global recovery.
After adjusting for behavioural biases, inflation expectations edged up to 3.2 per cent in December from 2.8 per cent in September.

"The trend in inflation expectations adjusted for behavioural biases seems to be in line with the general increase in inflation expectations, although inflation expectations for some components like healthcare, clothing and footwear, recreation and culture, and communications have increased by a larger extent," DBS and SMU said.
They added that the survey did not find any component where the inflation expectations were significantly influenced due to Covid-19, unlike September's survey.
Consumption patterns have also seemed to pick up, appearing to have reverted to pre-Covid-19 norms with the increase in consumer spending and economic activities. This came after the moderate decline in spending on clothing and footwear, transportation, and recreational and cultural activities in September.

Core inflation expectations, excluding accommodation and private transport costs, increased by 0.4 percentage point to 2.5 per cent in December.
According to DBS and SMU, this "possibly reflects renewed economic activities, including a moderate increase in world commodity prices, as the world economy entered a recovery phase".
Core inflation expectations for a subgroup of the population who own their accommodation and use public transport edged up to 2.1 per cent, up from 1.9 per cent in the previous survey.
DBS and SMU said that expectations of this subgroup resembled the Singapore core inflation expectations as they were not exposed to private road transportation or accommodation expenses.

The survey found that 71 per cent of the respondents felt that Covid-19 would have a significant impact on inflation, a decrease from the 77 per cent in September. Some 72 per cent of the respondents felt that the pandemic would have a long-term impact on inflation.
Around 18 per cent of the respondents also felt that they would experience a salary reduction of more than 5 per cent in the next 12 months. Median salary increments expectations remained between minus 1 per cent and 1 per cent.
As a measure of the trade-off between prioritising economic growth compared with the cost of life, the survey found that for every person who wanted to prioritise life over livelihood there were three people who prioritised livelihood over life.
"These observations signal a higher public appetite of normalisation of economic activities that governments are paying heed to globally," said SMU's Prof Ghosh.

DBS chief economist and managing director of group research Taimur Baig said that Singapore's inflation expectations appeared to be responding to global cues, and seemed to be improving, although not particularly strong.
"With the depth of the pandemic hopefully behind and supportive policies still in place, some pick-up in food, energy, manufactured goods and services prices can be expected. Accordingly, we see a welcome revival in inflation expectations, although they are by no means high," he said.

 

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Plan for GST hike between 2022 and 2025 unchanged: Lawrence Wong​

The planned GST hike from 7 per cent to 9 per cent was announced in Budget 2018. PHOTO: ST FILE

Choo Yun Ting


OCT 6, 2021

SINGAPORE - The plan to raise the goods and services tax (GST) between next year and 2025 remains unchanged, Finance Minister Lawrence Wong told Parliament on Tuesday (Oct 5).
Speaking during the debate on the Income Tax (Amendment) Bill, he also stressed that the Government continues to "consider all options" to address income and wealth inequalities and support small and medium-sized enterprises (SMEs).
Mr Wong was responding to several MPs, including Mr Yip Hon Weng (Yio Chu Kang) and Workers' Party MP Louis Chua (Sengkang GRC), who had raised concerns about the timing of the GST hike as well as the possibility of a wealth tax to address wealth inequality issues.
The minister reiterated the need to raise the Government's recurring revenues given that recurrent expenditures will continue to go up due to factors such as healthcare and social spending, adding that there is "no avoiding this".
The planned GST hike from 7 per cent to 9 per cent was announced in Budget 2018, and a $6 billion Assurance Package was announced in Budget 2020 to help cushion the impact of the hike, with more help directed at lower-income households.
"We will continue to consider all factors including our fiscal needs, as well as the prevailing economic conditions, in deciding on the timing of the GST rate increase," said Mr Wong.
Addressing Mr Chua's suggestions of wealth taxes and more reliefs and aid for SMEs, the minister said that they were both aligned in their intentions to address wealth inequalities and support SMEs.

"But to address wealth inequalities, what exactly do we do, what sort of measures do we put in place - that's something that we will have to study carefully," Mr Wong said, adding that Singapore has a form of wealth tax through the tax levied on private residential properties, which is tiered according to the property's annual value.
"I am unable to reveal what we are thinking about now. I think that would be premature and I don't want to pre-empt the Budget next year, but obviously we are continuing to consider all options to address... No. 1, wealth and income inequalities and No. 2, what more we can do to support SMEs," he said.
The Bill also included legislative amendments to effect tax measures announced in the Budget statement earlier this year as well as other Covid-19 support measures introduced in May and July.

Speaking during the debate, Mr Louis Ng (Nee Soon GRC) asked about tax deductions for landlords, noting that it seems to encourage a situation where a landlord could evict a failed tenant and as a result pay reduced taxes on their rental income.

He called into question the provisions in the Bill, given recent tensions between commercial tenants and landlords during this Covid-19 pandemic, which have led to laws being passed to compel landlords to provide rental waivers, penalty-free termination of rental contracts and match rental support by the Government.
Mr Ng also asked for a clarification on how the Inland Revenue Authority of Singapore (Iras) intends to ascertain whether a landlord has made reasonable efforts to find a new tenant during the vacancy period and guard against bad-faith landlords.

In reply, Mr Wong said that the section in the Bill was in line with the existing tax treatment which Iras applies, and the legislation provides certainty for taxpayers.
On what landlords would have to do to show reasonable efforts to secure a tenant during the vacancy period, he cited how Iras would request the taxpayer to provide evidence that the property was maintained in lettable condition, or that the property had been advertised for rent.
Addressing a request by Mr Don Wee (Chua Chu Kang GRC) for the option to accelerate the write-off of the cost of acquiring plant and machinery for another year, Mr Wong urged that schemes be considered in totality.
"We continue to monitor the situation closely and review all our schemes as needed. And should there be a need to extend any measure, any such extension will then be announced at Budget 2022, and then it will be effected in next year's Income Tax (Amendment) Bill. So it's an ongoing process."