Parliament: Inflation 'a clear and present issue', but Singapore ready to tweak policies

WHILE the government has recognised that higher inflation may cause concern, the Republic is still on track for a projected economic recovery and has a "multi-pronged approach" to tackle inflation, Minister of State for Trade and Industry Alvin Tan told the House on Wednesday (Nov 3).

That's even as Tan acknowledged that "as we all know, inflation is a clear and present issue confronting and vexing economists" around the world.

He noted that global port congestion and supply bottlenecks for items such as semiconductors "have contributed to a rise in the prices of imported consumer goods" in Singapore, alongside external cost pressures from increases in global energy and food commodity prices.

Domestic cost pressures are also expected to grow, due to factors such as job market recovery and strong rental demand while a construction manpower crunch delays housing project completion.

"The government will continue to monitor inflation and cost of living pressures closely, and adjust our policies where necessary," he said, in reply to separate parliamentary questions from People's Action Party MPs Liang Eng Hwa (Bukit Panjang SMC) and Saktiandi Supaat (Bishan-Toa Payoh GRC) on efforts to mitigate the impact of rising costs on households and businesses.

Headline inflation is officially forecast to stand at around 2 per cent in 2021 and average between 1.5 per cent and 2.5 per cent in 2022.

Still, Tan added: "Despite this rise in inflation, Singapore's economic recovery for the year remains on track.

"Barring a major setback in the global economy, gross domestic product (GDP) growth is expected to come in between 6 per cent and 7 per cent for the full year, mainly supported by outward-oriented sectors."

Noting that the inflation situation may be an issue for lower-income households in particular, Tan highlighted measures that policymakers have taken to address cost pressures, such as the central bank's move in October to tighten its trade-weighted Singapore dollar policy settings.

The government is also managing domestic factors, such as the supply of industrial and commercial space "to help moderate business cost increases and reduce the knock-on impact on consumer prices", he added, while also pointing to rental relief and wage support schemes.

Liang further asked whether there is more room for a stronger Singapore dollar to mitigate imported inflation, since further currency strength could potentially affect the Republic's export competitiveness. In response to this supplementary question, Tan said that exports "have seen a very strong recovery this year" despite the higher input prices.

He added: "When our export performances are strong, it also means that our exports remain competitive in the international markets, and we must keep these markets open so that our goods can flow out. And it also manages a hedge against other price increases inbound."

Meanwhile, to a call by Saktiandi for updates on "other pre-emptive efforts" to manage cost pressures, Tan disclosed that the Retail Price Watch Group, formed in 2011, has since been stood down "but we have other measures and other ways of monitoring the price of goods".

"The government maintains a very strong vigilant stance on price increases and price fluctuations," said Tan, naming the diversification of food and energy sources as one example of what he called a multi-pronged, broad and expansive approach to inflation.