ECONOMY | Staff Reporter, Singapore

Brace yourselves for a 1.3% inflation hike in 2018

No thanks to price pressures on fuel, water, and utilites.

Singaporeans need to brace themselves for prices to rise by at least 1.3%, no thanks to underlying price pressures across fuel, water, and other utilities, BMI Research said.

Singapore Business Review previously reported that the city state's headline inflation hit 0.4% YoY in December, whilst core inflation grew by 1.3% YoY.

According to a report, a one-time water price hike looms in July, whilst rising utility costs will pose upside pressures.

BMI Research's Oil and Gas team also forecasts the Brent to average US$65/bbl in 2018 compared to US$54.8/bbl in 2017.

The price hike is expected to seep into overall inflation, as Singapore is a net importer of refined fuels. This is also expected to have an impact on the transport sector.

Utility prices are also expected to head higher in the coming months.

In December 2017, SP Group announced that electricity tariffs would rise by an average of 6.3% per kilowatt hour in the first quarter of 2018 due to the higher cost of natural gas.

Lastly, water prices are set to increase by 30% by July as announced by the government in 2017 to reflect higher operational costs and greater investments in water infrastructure. These are likely to present upside pressures to inflation.

However, inflation is likely to remain within the monetary authorities' acceptable range of 0-1.0% in the first half of the year as the effects of higher prices take time to feed through the economy.

"As we only expect inflation to pick up in 2H2018, we believe that the Monetary Authority of Singapore (MAS) will maintain its existing stance during its meeting in April to support growth, but note that the risks to our view are to the upside," the research team said.

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