23-1-2024 (SINGAPORE) Singapore’s core inflation saw a slight uptick to 3.3 percent year-on-year in December of the previous year, according to official data released on Tuesday (Jan 23). The Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) attributed the increase from 3.2 percent in November to higher services inflation.
Core inflation, excluding accommodation and private transport costs, had surged to 5.5 percent in January and February the previous year, reaching a 14-year high before gradually declining. It dropped to 3 percent in September, marking the lowest since March 2022. For the entirety of 2023, core inflation averaged 4.2 percent, up from 4.1 percent in 2022.
Simultaneously, the headline consumer price index, reflecting overall inflation, reached 3.7 percent in December, surpassing November’s 3.6 percent. MAS and MTI noted a faster pace of increase in private transport costs and services inflation.
The overall inflation rate for the year came in at 4.8 percent, a decrease from the previous year’s 6.1 percent. The increase in the Goods and Services Tax (GST) rate to 8 percent played a role in influencing inflation rates in 2023, as per authorities.
Various sectors contributed to the changes in inflation rates in December. Services inflation rose to 3.9 percent from 3.5 percent in November, driven by increased holiday expenses. Private transport inflation increased to 5.0 percent, with larger rises in car and petrol prices. Retail and other goods inflation inched up to 1.1 percent, while electricity and gas inflation eased to 1.3 percent.
Food inflation fell to 3.7 percent as the prices of non-cooked food rose at a more gradual pace, and accommodation inflation remained unchanged.
Looking ahead to 2024, MAS and MTI projected that core inflation would average between 2.5 percent and 3.5 percent. Excluding the transitory effects of the 1 percentage point increase in the GST rate to 9 percent, core inflation is expected to come in at 1.5 percent to 2.5 percent. Core inflation is anticipated to be affected by increases in the GST rate, bus and train fares, and electricity and gas tariffs in early 2024. However, it is expected to gradually moderate throughout the year as import cost pressures decline and domestic labor market tightness eases.
Factors such as falling global crude oil prices, declining global prices for food commodities and manufactured goods, and improved supply conditions in international hospitality industries are anticipated to contribute to a moderation of inflation in Singapore in 2024. Additionally, the strengthening Singaporean dollar trade-weighted exchange rate is expected to temper imported inflation.
MAS and MTI noted potential upside risks to inflation, including geopolitical conflicts affecting global energy and shipping costs, adverse weather events impacting food commodity prices, and persistent tightness in the domestic labor market. Conversely, an unexpected weakening in the global economy could lead to a faster easing of cost and price pressures.
