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Friday, October 23, 2020 – 1:49 pm
SINGAPORE authorities have improved the lower band of their headline inflation forecast for 2020 and expect core inflation to turn “slightly positive” in 2021 after having been in negative territory for eight consecutive months.
Both core inflation and headline inflation are expected to be between -0.5% and 0% in 2020, the Monetary Authority of Singapore (MAS) and the Ministry of Commerce and Industry (MTI) said in a joint statement. . This is a slightly improved outlook compared to its previous forecast of -1 to zero percent.
Core inflation, which excludes accommodation and private transportation, rose to -0.1% year-on-year in September, from -0.3% the previous month, according to recent data from the Singapore Department of Statistics on Friday.
The softer pace of decline was mainly due to lower reductions in utility costs and electricity and gas, MAS and MTI said.
Headline inflation, which covers all items, stood at zero percent year-on-year, compared to -0.4 percent in August, due to a “more gradual decrease in private transportation costs,” MAS and MTI said.
Service costs fell more modestly due to a steeper rise in telecom service fees, as well as a smaller drop in tuition and other fees, they said.
Meanwhile, the cost of electricity and gas fell at a slightly slower pace as uptake of new subscriptions on the open electricity market slowed, according to authorities.
Over the next few quarters, external inflation is likely to remain low amid weak demand in key commodity markets and persistent negative output gaps in Singapore’s main trading partners, MAS and MTI said.
At the national level, cost pressures are expected to remain subdued, and the accumulated slack in the labor market would affect wages, they added.
“However, core inflation is forecast to turn slightly positive in 2021 as the disinflationary effects of government subsidies introduced this year fade and demand for some domestic services gradually recovers,” both authorities said.
Accommodation costs are expected to fall, in part due to declining foreign employment, while private transportation costs should rise modestly amid an anticipated reduction in COE supply, they added.
In 2021, core inflation is expected to average zero to 1 percent, and headline inflation, -0.5 to 0.5 percent, according to authorities.
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