Singapore cannot guard completely against Mideast conflict: DPM Gan

Inflation is now expected to exceed original projections of 1% to 2%.

Singapore will not be able to guard itself completely from the impact of the Middle East conflict as a small and highly open economy, said Deputy Prime Minister Gan Kim Yong.

The crisis is unlikely to be short-term and could escalate further, potentially triggering a global slowdown and higher inflation, according to Gan.

The conflict involving the US, Israel, and Iran has entered its sixth week and disrupted the Strait of Hormuz. Vessel traffic through the strait has dropped from around 135 ships daily under normal conditions to about six.

“About 95% of Singapore’s electricity is generated from natural gas, whose price is mostly pegged to market prices,” he said.

Electricity tariffs have already risen by 2.1% in the second quarter and are expected to increase further as higher fuel costs are reflected.

Meanwhile, inflation is expected to exceed earlier projections of 1% to 2%.

GDP growth, previously forecast at 2% to 4% for the year, is expected to be affected in the coming quarters.

“Whilst the conflict impacts many sectors, some will feel it more than others,” Gan added.

Sectors most exposed include energy and chemicals, particularly firms reliant on natural gas and crude oil feedstock, Manufacturing, transport, tourism, retail, and food services.

In response, Gan said the government has convened a multi-agency response to secure energy supplies, support businesses and workers, and mitigate cost-of-living pressures.