Only a few months more of high inflation: Trade Minister

Singapore inflation has hovered at 5% but it will experience a steep drop in the next two quarters, says Minister Lim Hng Kiang.

The inflation easing will be significant to the point that it might bring full-year inflation to an average of between 3.5-4.5%, according to government estimates.

The forecasts came as the Singapore parliament inquired about the country's ongoing plans to combat rising inflation. Mr Lim Hng Kiang reiterated that the government is doing everything it can to keep inflation in check, adding that the Retail Price Watch Group (RPWG) would keep a close watch on excessive price increases of food and other daily necessities.

According to the official data, Singapore’s CPI inflation was 5.2 per cent in March and 4.9 per cent for the first quarter of this year.

"In the next few months, CPI inflation is expected to remain at around 5 per cent. Barring external shocks, we expect this to ease gradually in the second half of the year to bring full year CPI inflation to between 3.5 and 4.5 per cent," said the Trade Minister.

"The two largest contributors to CPI inflation are expected to be imputed rentals on owner-occupied accommodation and car prices. Together, they will account for more than half of the inflation this year. As the majority of resident households in Singapore own their homes, they do not actually incur rental expenditure. Likewise, the majority of resident households will not be directly affected by the rise in COE premiums as new car buyers make up a small proportion of all resident households," he said.

"Nonetheless, the Government remains committed to keeping inflation in check. Last month, MAS tightened the monetary policy stance further through an appreciation of the Singapore dollar. This keeps imported inflation in check and also moderates the external demand for our exports, thereby reducing demand-led pressures on inflation," he added.

"While the appreciation of the exchange rate is a key measure used to curb inflation on the demand side, it is not the only measure that the government has implemented to dampen inflationary pressures. The approach we have adopted is a multi-pronged one, which also includes measures to ameliorate domestic supply-side constraints," he said.

"For example, the government has implemented fiscal and macro-prudential measures to cool the property market. Where we can increase supply and moderate supply constraints to relieve cost pressures in the housing, industrial and other property segments, we have also done so directly. Another supply side measure is the government’s effort to work with unions and companies to raise productivity. These include incentives to encourage companies to invest in automation, innovation and capability development, as well as to support the training and upskilling of workers," he said further.

"the government is committed to help cushion the impact of rising cost of living on households. The government provides cash grants, such as the U-Save rebates which help HDB households to directly offset their utilities bills. Although these grants do not reduce headline CPI inflation, they help to offset the higher cost of living experienced by households," he added.