UOB revises inflation forecast to between 4.5% and 5%

The inflation picture will get worse before it gets better – that is the message from UOB in a forecast given on Wednesday.

It said flooding in many agricultural areas has reduced food supplies, driving up prices of necessities like wheat and coffee products.

There are also other domestic factors at play.

The hike in taxi fares was one reason why UOB increased its inflation forecast for 2008 – to between 4.5 percent and 5 percent.

That is up from the previous call of 3.9 percent.

UOB said it did not expect the fares to go up by as much as they did.

Jimmy Koh, Head of Economics-Treasury Branch, UOB, added that inflation is also being driven by price increases in necessities such as coffee and wheat products.

This is because heavy rain and flooding in many agricultural areas is reducing food supplies.

The annual values of all HDB flats is also driving inflation.

They were raised at the start of the year by an average of 20 percent to better reflect prevailing market rentable values of properties.

Despite the upgrade, UOB said inflationary pressures will taper off towards the end of the year.

Mr Koh said, “As a whole, if you look at the broader inflation trajectory, I think it’s still fairly contained. Like if we talk about equipment, televisions…prices of all these have come off. Why? Because of integration in the global system…So while inflation is higher, we are not seeing inflation running away within the region and Singapore.”

UOB is expecting the government to introduce measures to help lower-income families deal with the rising prices.

It said Singapore’s fiscal policy is now more targeted at lower-income groups, to buffer against the widening income gap. – CNA/ms

Source : Channel NewsAsia – 9 Jan 2008

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