Singapore slashes inflation forecasts as global growth slumps

Domestic wage growth will also slow.

It’s barely two months into 2016 and Singapore has already resigned itself to an entire year of zero or negative inflation.

The Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) have downgraded their full-year inflation forecasts to -1% to 0% from -0.5% to 0.5% previously, after consumer prices in the city-state dropped for the 15th consecutive month in January.

Policymakers said that the downgrade was on back of low commodity prices and weak global demand conditions.

Notably, global oil prices have fallen significantly since the forecast was released in mid-October, and are expected to average lower for the whole of 2016 compared to last year.

The joint statement added that on the domestic front, pass through wage costs will also remain tempered by the subdued economic growth environment.

However, the forecast for MAS Core Inflation is unchanged at 0.5–1.5%, reflecting the smaller weight of oil-related items and the exclusion of private road transport costs. 

MAS Core Inflation is still expected to pick up gradually over the course of 2016, as the disinflationary effects of oil as well as budgetary and other one-off measures ease.