Singapore’s annual inflation rate rose to a new 26-year high of 7.5 percent in April as food, housing and transportation costs soared and is now a risk to the economy, the government said on Friday.
Food prices alone rose 8.5 percent, transportation and communication were 7.0 percent higher and housing costs became 11.8 percent more expensive, the statistics department said.
It said April’s inflation rate is the highest since February 1982, when it stood at 9.0 percent.
“External price pressures have continued to contribute significantly to our domestic headline inflation numbers,” the Ministry of Trade and Industry (MTI) said in a separate statement.
“Oil and food prices have risen more rapidly and are expected to remain elevated over the near term.”
Oil prices surged to unprecedented record peaks of more than US$135 a barrel on Thursday and analysts said it could still go higher.
MTI and the Monetary Authority of Singapore (MAS) have bumped up their forecast for inflation this year to 5-6 percent from 4.5-5.5 percent.
Ravi Menon, second permanent secretary at the trade ministry, said inflation is emerging as a bigger risk to the economy than growth.
“Inflation has been running ahead of what we expected… We are facing risks on both fronts but the balance has shifted towards inflation,” Menon told reporters.
“We expect food and oil prices to remain elevated over the near term and filter through into domestic prices.”
Singaporeans and residents have become creative in adjusting to higher living costs, adopting such measures at taking fewer taxi rides to eating out less and shortening shower time to save on water bills.
Local charities said rising food prices are also driving more Singaporeans, especially poor senior citizens, to join queues for free meals.
The trade ministry said inflation should remain around the current levels for the next two months and ease in the second half of the year.
Analysts said the central bank could further strengthen the Singapore dollar in a bid to tame inflation.
Tiny Singapore, Southeast Asia’s most advanced economy, imports most of its needs because it lacks the natural resources and agricultural base of its much bigger neighbours.
MAS, Singapore’s central bank, deals with inflation by weighing the Singapore dollar against a basket of currencies.
It tightened its foreign exchange policy at its last meeting in April and policy makers said they have no plans to review the policy until the next meeting in October.
“Looking at the mix of risks to both inflation and growth, our assessment is that it remains appropriate given the mix of uncertainties and the forecasts that we are projecting,” said MAS deputy managing director Ong Chong Tee.
“There are no plans now to adjust the policy stance. Obviously we will be looking closely at the numbers over the course of the next months, and review this again in October,” he said.
Source : Channel NewsAsia – 23 May 2008