Singapore witnessed an unexpected acceleration in core inflation during December, according to Bloomberg. Despite this, authorities maintained their 2024 outlook, signaling that although price pressures persist in the city-state, they are still manageable.
The core measure, excluding housing and private transportation costs, is monitored by the Monetary Authority of Singapore, and it surged to 3.3% last month compared to the previous year, as reported by the Department of Statistics. This figure surpassed all expectations outlined in a Bloomberg News survey, where the median projection was a 3% increase. It also surpassed the Ministry of Trade and Industry’s forecast from the previous month, anticipating core inflation to fall within the upper end of the 2.5%–3% range by the year-end.
A joint statement from the Monetary Authority of Singapore and the MTI attributed this rise primarily to increased services inflation. Notably, holiday expenses and transportation fares, specifically for buses and trains, rose at an accelerated pace in December.
While acknowledging the likelihood of core inflation experiencing some volatility in early 2024 due to elevated electricity and gas prices and the rise in the goods and services tax, authorities expressed confidence that it would gradually moderate throughout the rest of the year. This expectation is based on the anticipation of declining import cost pressures and an easing of the tightness in the domestic labor market.
The central bank and the trade and industry ministry maintained their forecast for 2024 core inflation to average between 2.5% and 3.5%. Excluding the transitory effects of the GST tax hike, the gauge is projected to be in the lower range of 1.5% to 2.5%.
The Monetary Authority of Singapore (MAS), utilizing the exchange rate as its primary tool, retained its policy stance unchanged during its two scheduled reviews last year. This decision followed five consecutive tightening settings between October 2021 and 2022. This year, the MAS plans to initiate a quarterly review of monetary policy.
Although maintaining the Singapore dollar’s nominal effective exchange rate on an appreciating trajectory has assisted in offsetting imported inflation, the central bank faces the challenge of balancing its price stability objective with economic growth. Notably, Singapore managed to avoid a recession in 2023 and experienced faster-than-expected growth at 1.2%.
Additionally, Singapore’s all-items inflation also saw an uptick to 3.7% from the previous year, surpassing the 3.5% median estimate. This compares to a rate of 3.6% in November. The forecast range for the broader measure in 2024, currently set at 3%–4%, is slated for an update in the MAS’ January monetary policy statement.
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