Singapore central bank sees price risks amid above-trend growth

·2 min read
Rising imported and labour costs, as well as a pickup in domestic activity, will support a broad acceleration in inflation, MAS said in its twice-yearly macroeconomic outlook. (PHOTO: Getty Commercial)
Rising imported and labour costs, as well as a pickup in domestic activity, will support a broad acceleration in inflation, MAS said in its twice-yearly macroeconomic outlook. (PHOTO: Getty Commercial)

By Michael S. Arnold

(Bloomberg) — Global supply chain disruptions and upward pressure on wages could linger longer than anticipated, according to Singapore’s central bank, increasing inflationary pressures on the city-state as it continues growing at a faster-than-usual rate next year.

The Monetary Authority of Singapore said in its twice-yearly macroeconomic outlook Thursday that rising imported and labor costs, as well as a pickup in domestic activity, will support a broad acceleration in inflation.

Singapore’s central bank, which earlier this month tightened monetary policy settings to front-run the rise in consumer prices, is among global policymakers growing increasingly concerned that current inflationary pressures, mainly from supply disruptions and commodities, risk becoming more persistent.

While it sees global supply bottlenecks being resolved next year as the pandemic eases “there is a risk that supply problems could become entrenched,” the MAS said in the report.

It added that the decline in labor force participation in many economies “may not reverse as completely or rapidly as anticipated, leading to more persistent upward pressure on wages that could eventually feed through to consumer prices.”

The MAS on Thursday reiterated that its measure of core inflation should be near the upper end of its 0%-1% range this year and accelerate to 1%-2% next year.

After a forecast 6%-7% expansion in gross domestic product this year, the MAS expects Singapore “should register slower but still-above trend growth in 2022, barring the materialisation of downside risks arising from the evolution of the virus or other global developments.”

Economic growth forecasts by the MAS released Thursday include:

2021

2022

Global

5.6%

4.8%

Euro zone/U.S./Japan

4.9%

4.1%

Asia ex-Japan

5.9%

5.1%

Singapore

6%-7%

“slower but still above-trend”

 

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