Singapore’s inflation forecast for 2015 cut sharp from 1.7% to 0.4% YoY

Amid a mixed bag of factors.

The oil rout and a cooling property market are denting Singapore’s inflation dynamics.

According to a report by DBS, inflation forecast for 2015 has been shaved to 0.4% YoY. This is a sharp cut-back from a previous expectation of 1.7%.

The drastic decline in oil prices, a significantly less than expected increase in wage growth, a cooling property market, as well as moderation in healthcare costs due to the introduction of the Pioneer Generation Package are the key reasons.

DBS says that not only is the base of the inflation trajectory for this year drastically reduced, the slope of this trajectory, in the form of sequential changes to prices, is likely to be significantly less than previously anticipated. Inflationary pressure, be it external or domestic, will stay relatively muted in the coming months.

Official inflation forecast for 2015 has also been lowered to -0.5 to 0.5%, from the 0.5–1.5% expected in October. Meanwhile, MAS core inflation is expected to be 0.5–1.5% this year, down from the earlier forecast range of 2–3%. Based on DBS’s estimation, headline inflation will likely average -0.1% in 1H15 before inching higher to 0.9% in 2H15.