Singapore inflation to remain high until Q2 2012

31 October 2011   Category: News, Asia, Singapore   By Weilyn Loo

Inflation in Singapore is likely to remain elevated until the second quarter of 2012 before easing as economic conditions weaken, according to the Monetary Authority of Singapore (MAS).

Accommodation costs and car prices will remain sticky in the near-term, keeping inflation high for the rest of 2011 and into the early part of 2012 before falling more significantly in the second half of the year, MAS predicted in its October Macroeconomic Review.

MAS forecasts that the Consumer Price Index (CPI) – which measures inflation – will average above 5% in H2 2011 and close to 4% in H1 2012, before easing to around 2% in the second half of next year.

Meanwhile, price pressures continued to intensify across Asia ex-Japan, driven by higher food and commodity prices, and tight labour markets. Headline CPI inflation in the region rose to 6.1% year-on-year in the third quarter of 2011, from 5.5% in Q1. Nonetheless, MAS pointed out that there are signs that the upward momentum has slowed and headline rates are starting to stabilise in some countries, particularly Indonesia and Taiwan.

Even so, high inflation rates persisted in China and India. The main factor behind the run-up in China has been food price inflation, which exceeded 10% throughout the first half of 2011 because of weather-related factors and a rise in hog prices. In India, inflation stayed close to the double-digits during the same period, due partly to higher petroleum prices, increases in the minimum support prices for some agricultural commodities, and strong underlying demand pressures. To curb inflationary pressures, China and India tightened monetary policies several times over the first half of 2011 despite a weakening global outlook, MAS noted in its report.