Getting Used to Inflation in Singapore

Just one month ago, the news reported that inflation slowed down and core inflation dropped from 2.4% to 2.2% from July to August.  Just this week, figures showed that core inflation is up and back to 2.4% in September from 2.2% in August.  Overall inflation rates which reflects housing and private transport is much higher – 4% in July, 3.9% in August, 4.7% in September compared to the previous year’s figures.  August, by the way, was a 2-year low in inflation rates.

The explanation has been the same for the past few years – rising COE premiums and runaway property prices, and the economy is flooded with cash because of low interest rates.

Comparing apples and oranges for fun, inflation in Hong Kong is 3.8% from the year before, and inching up as well. Inflation has hit the region and none is spared, although Singapore is hit worse.

MAS is relaxing the appreciation of the SGD to slow down inflation rates and bring down the price of imported goods e.g. fuel, food. However, this makes exports expensive – so manufacturing is hit hardest. For example, it has been contracting since July. Is there a silver lining to this news of rising prices, stagnant economy, uncertain job security in certain industries and contracting savings? The positive spin is that inflation so far has not peaked the highest recent inflation rate of 6.5% in 2008. Also, recession is again held at bay for now.

It could be worse, but small consolation.


2 responses

  1. Pingback: Daily SG: 24 Oct 2012 | The Singapore Daily

  2. Inflation is a big problem for Singaporeans. In HK the situation is slightly different as they are attached to China and all the hot money flowing out naturally lands there. In Singapore we have the unique situation of locking our CPF into government bonds. So the majority (after housing … ) of our retirement funds are invested in government debt that has been yielding below inflation for a good few years now. Last year the stock market was up 19%, but CPF OA is stuck at what 2.5%? With inflation over 3, over 4%, it is essentially deflating our retirement savings. If we had a better chance to invest our CPF in the stock market rather than government debt, the problem wouldn’t be so bad, but of course, that isn’t so much of an option, especially for those with depleted savings …

    April 5, 2013 at 11:53 pm

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