Singapore inflation has troughed, projected to pick up to 0.5-1.5% in 2017: MTI/MAS

INFLATION has troughed in Singapore and is projected to pick up to 0.5-1.5 per cent in 2017, from around -0.5 per cent this year reflecting the rise in private road transport cost.

The Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in a joint statement on Wednesday that the cost of private road transport is projected to rise next year, largely as a result of the expiry of the road tax rebate for petrol vehicles, the upward revision of car park charges with effect from December 1, 2016 and higher petrol prices.

MAS core inflation is expected to average around 1 per cent in 2016 before rising to 1-2 per cent next year, as energy-related components begin to contribute positively to inflation and temporary disinflationary effects from budgetary measures fade. The latter include the abolition of national examination fees for Singaporeans, the reduction in the concessionary foreign domestic worker (FDW) levy, and government subsidies and support for MediShield Life premiums.

However, the authhorities said the increase in core inflation would be gradual, given the absence of more generalised demand-induced price pressures.

On the external front, imported inflation is likely to rise mildly given ample supply buffers in the commodity markets and soft global demand conditions. Notwithstanding continued short-term volatility, global oil prices are expected to increase in 2017 from its trough this year.

Domestically, overall cost pressures should be muted. Amid a pullback in hiring, conditions in the labour market have slackened. MAS and MTI said this would cap underlying wage growth, even as non-labour business costs have eased. The subdued growth environment will also constrain the extent of cost pass-through to consumer prices, they added.