The pace of inflation will pick up this year as rising oil prices are set to drive up electricity and petrol prices, Senior Minister of State for Trade and Industry Koh Poh Koon told parliament on Monday.
Increases in the price of water and car park charges will have a lesser impact, he added, saying they will contribute to a small and temporary rise in inflation, CNA reported.
All factors considered, the official headline inflation rate is expected to be between 0.5% and 1.5% in 2017, up from 0.5% negative inflation last year.
Singapore’s electricity tariff is pegged to prevailing gas prices, which have picked up since the second quarter of 2016 and will likely average higher this year.
As a result, the electricity tariff reversed its downward trend to post an increase in the third quarter last year, “and is generally expected to be higher over the coming quarters”, Koh said.
“However, notwithstanding the increase, it should be noted that the current tariff remains around 17% lower than the peak reached in the second quarter of 2014,” he added.
March’s headline inflation rate was 0.7%, unchanged from February, ahead of a temporary increase in inflation that the ministry of trade and industry has forecasted—as the increase in car park charges took effect in December last year.
Along with upcoming increases in water prices—the first phase of which is to start in July—the government adjustments will contribute around 0.2 percentage point to inflation in 2017, Koh said.
The forecast, however, does not take into account the offsets provided by U-Save rebates, he added. U-Save rebates—disbursed four times a year—benefited some 880,000 Singaporean Housing and Development Board households in April.
Meanwhile, as Singapore wrestles with slower economic growth and disruptive technological changes, challenges have emerged in the local labor market.
Prime Minister Lee Hsien Loong recently noted that unemployment increased last year and even with better growth in 2017, the government expects a “steady trickle of redundancies” as the economy continues to restructure.
He added that other developed countries are seeing much higher unemployment of between 5 to 10 per cent, and as Singapore grapples with similar pressures as these mature economies, the overall unemployment rate–which stood at 2.3% as of March 2017–“will gradually go up”.
