Why Singapore saw softer inflation in January despite GST hike

In January, consumer prices eased to 2.9% YoY.

Singapore saw a slower price increase in January despite the increase of goods and services tax (GST) in the same month, which experts said reflects a “dampened passthrough of the GST hike to consumer prices.

According to Alvin Liew, UOB senior economist, some retailers may have opted to absorb or delay the GST increase to preserve customer goodwill.

Liew said the normalisation of holiday demand may have also affected the underwhelming headline and core inflation print.

Jester Koh, associate economist of UOB, said there was post-holiday normalisation in the recreation and culture component as “holiday expenses eased owing to the dissipation of the strong holiday demand in December.”

Given the latest inflation figures, UOB experts believe that the Monetary Authority of Singapore (MAS) will likely commence monetary policy normalisation via a slight slope reduction by 50 bps to an estimated 1.0% p.a. in the April 2024 monetary policy statement.