, Singapore

Inflation forecast moderately increases to 3.2% in December 2021: SInDEx

The forecast in September 2021 was 3.1%.

Inflation expectations for 2022 moderately increased in December 2021 to 3.2% from 3.1% in September 2021 based on the 42nd DBS-SKBI Singapore Index of Inflation Expectations (SInDEx) Survey conducted by Sim Kee Boon Institute for Financial Economics (SKBI) of the Singapore Management University (SMU).

This is on par with the 10-year fourth quarter average headline inflation expectations of 3.2%.

Maybank, for its part, said headline inflation could increase by about 1.3 percentage points in 2022 taking into account the looming 2% GST hike which the analyst said could “intensify inflation pressures and compound the risks of a wage-price spiral.”

“MAS will likely tighten again in April 2022 via a steeper appreciation slope, and possibly, double-up with a re-centring of the S$NEER band,” Maybank said.

Last October 2021, MAS already tightened its monetary policy to “ensure price stability over the medium term”.

Assuming that there will be no 2% GST hike in 2022, Maybank said headline inflation will be at 2.6% and core inflation at 1.8% in 2022.

On the other hand, overall CPIEx Inflation Expectations decreased to 3.1% in December 2021 from 3.7% in September 2021 “after adjusting for potential component-wise behavioural biases and re-combining across components.”

Inflation expectations for components like transportation, housing and utilities, healthcare, recreation and culture, communications, and miscellaneous goods and services also saw declines in the recent survey.

Meanwhile, One-year-Ahead CPIEx core inflation expectations, excluding accommodation and private road transportation-related costs, increased from 3.0% in September 2021 to 3.1% in December 2021.

Here are other findings from the 42nd SInDEx survey:

  • The One-year-Ahead composite index SInDEx1 that puts less weight on more volatile components like accommodation, private transport, food and energy-related expenses polled at 3.2% in December 2021, an increase from the 3.0% figure polled in September 2021. It is on par with 3.2% since the survey’s inception in 2011 till 2020.
  • In December 2021, around 59% of the survey respondents reported their belief that Covid-19’s impact on inflation would be significant compared to a higher proportion of 64% in September 2021. The share of survey respondents who feel that Covid-19 will have long-term impact on inflation similarly declined to around 59%, from about 68% in September 2021. Both results indicate that despite the pessimistic turn of events with the emergence of the Omicron variant and the renewed restrictions on travel, new waves of infections and continued constraints on normal life are being accepted as “the new normal” of an endemic COVID-19.

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