Headline inflation to reach 5% in 2023: Standard Chartered

Core inflation will reach 4.4% for the year.

An analyst sees that inflation will still be a main headwind for this year, with headline and core inflation seen to reach 5% and 4.4%, respectively.

“Both forecasts include a 1ppt impact of GST implementation in January,” said Standard Chartered in its report.

Economic growth is also projected to slow down to 2% in 2023 from 3.8% in 2022 following weak external outlook, peaking of electronic cycle, normalised economic activity post COVID-19, tight monetary conditions and high inflation. 

In terms of monetary policy, it will pause after 680 basis points of FX policy tightening in addition to a c.300 bps rise in domestic interest rates, as inflation risks remain to the upside. 

The focus of the central bank remains on managing inflation, the analyst said.

“The MAS estimated that the cumulative effect of tightening may dampen core inflation by an average 1.5ppt per year. Given the 200bps re-centring in October, we estimate that the MAS will require more than a 0.5ppt shift in its annual core inflation forecast to justify further tightening near-term,” said Standard Chartered.