Headline and Core Inflation Lower Than Expected Amid Economic Adjustments
Singapore’s inflation rate eased in January, despite the goods and services tax (GST) increase to 9%, according to data from the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI).
Headline inflation fell to 2.9%, a decrease from December’s 3.7% and lower than the 3.8% forecast by private-sector economists. DBS economist Chua Han Teng highlighted that this marks the slowest inflation growth since the third quarter of 2021, attributing the decline to reduced accommodation and private transport costs.
Core inflation, which excludes housing and private transport, dropped to 3.1% from December’s 3.3%, also falling below the projected 3.6%. MAS and MTI noted that declining food and services costs contributed to this trend, despite the GST hike.
Authorities maintained their full-year inflation projections, expecting both headline and core inflation to average between 2.5% and 3.5%. Without the temporary effects of the GST increase, estimates range between 1.5% and 2.5%.
Economists predict core inflation may rise slightly in February due to higher food prices linked to the Chinese New Year. However, steady global commodity prices, a strong Singapore dollar, and slowing domestic cost increases could lead to lower inflation in 2024 compared to the previous year.
Barclays economist Brian Tan revised his 2024 forecast, lowering core inflation expectations to 3% from 3.2% and headline inflation to 2.2% from 2.7%. Meanwhile, DBS and UOB economists maintained their projections, with UOB expecting headline inflation at 3.5% and core inflation at 3%.
Despite inflation cooling, economists suggest bringing it further down may remain challenging. MAS is expected to keep its monetary policy stable through 2025, though some experts anticipate a slight policy adjustment in April to ease economic pressures.
