Inflation Trends and Forecasts for Singapore’s Economic Outlook
SINGAPORE: Core inflation in Singapore remained at 5.1% in December, maintaining the same rate for the third consecutive month, according to official figures released on Wednesday, 25 January. This rate was slightly above the 5% forecasted by a Reuters survey of economists.
Despite smaller price hikes in goods such as retail items, electricity, and gas, the rise in food and services costs offset these reductions, as noted by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI). Core inflation excludes accommodation and private transport costs.
The headline consumer price index (CPI), representing overall inflation, stood at 6.5% in December, down from 6.7% in November. This decrease was mainly attributed to slower inflation in private transportation.
For the entire year of 2022, core inflation averaged 4.1%, up from just 0.9% in 2021. Overall inflation for 2022 was recorded at 6.1%, significantly higher than the previous year’s 2.3%. Both sets of inflation figures were in line with government projections.
Food and Services Inflation Rise
Core inflation steadily increased throughout 2022, reaching a near 14-year high of 5.3% in September before stabilising at 5.1% for the remainder of the year.
In December, food inflation increased to 7.5% from 7.3% in November, driven by higher non-cooked food prices. Services inflation also rose to 3.7% from 3.6%, largely due to higher holiday expenses. At the same time, telecommunication service fees dropped at a slower rate, while tuition and other fees surged.
Electricity and gas inflation decreased to 16.5% in December, down from 16.7% the previous month. Inflation for retail and other goods also eased, falling to 2.8% from 3.3%, owing to lower prices for telecommunications equipment, personal items, and smaller increases in clothing and household goods.
Private transport inflation dropped to 15.5% in December from 17.2% in November, as the rate of increase in car and petrol prices slowed. Accommodation inflation also saw a slight reduction, from 4.8% to 4.7%, as housing rents increased at a slower pace.
Inflation Outlook for 2023
Looking ahead to 2023, headline inflation is expected to average between 5.5% and 6.5%, with core inflation forecast to range from 3.5% to 4.5%. Excluding the impact of the GST hike, headline inflation is projected to fall between 4.5% and 5.5%, with core inflation ranging from 2.5% to 3.5%.
However, there are risks to the inflation outlook, including potential shocks to global commodity prices and persistent inflationary pressures, both externally and domestically. Although global supply chain issues have eased, energy and food commodity prices remain elevated. Labour market tightness in major advanced economies continues to exert upward pressure on wages.
As accumulated costs pass through global value chains, Singapore’s imported inflation is likely to remain firm. On the domestic front, utility costs are expected to remain high, even though electricity tariffs have decreased from their peak in the third quarter of 2022. Businesses are expected to pass on increased costs related to imports, labour, and other factors to consumers.
Moreover, car and accommodation costs are anticipated to remain elevated due to tight car quotas and strong demand for rental housing.
