Leong Sze Hian / Andrew Loh
With the world economy in flux, trying to project or predict inflation rates is a very difficult thing to do – as our ministers have found out.
The Singapore Government has had to revise its inflation projections several times the last one year or so. It is like trying to shoot at a moving target. Indeed, it has changed its forecasts – from one made in late 2007 and early 2008 that said inflation would ease in the second half of 2008 to one which, made in October 2008, says that inflation will ease “in the next fifteen months”.
In November 2007, the Straits Times reported the Minister for Trade and Industry, Mr Lim Hng Kiang, thus:
Trade and Industry Minister Lim Hng Kiang has said it [inflation] could rise to 5 per cent in the first quarter of next year before moderating. (Straits Times)
Mr Lim, in May, reiterated the Government’s belief that inflation would ease in the second half of 2008:
It is still our central scenario that in the second half of the year we should see an easing off of inflation pressures. (Forbes) (May 2008)
Mr Lim held to his guns in one month later, in June 2008:
Surging inflation will ease in the second half of the year despite spikes in global food and oil prices, said Trade and Industry Minister Lim Hng Kiang… (Property Market)
In July of 2008, the Finance Minister, Mr Tharman Shanmugaratnam, supported this view but with a caveat:
We also expect inflation in the second half of the year to be lower, because the effects of last July’s GST increase on inflation will wear out. However, the recent sharp rise in global oil prices will add pressure on inflation. (Sprinter)
All well and good. Singaporeans were looking forward to an easing of the high cost of living here, not helped by the spiralling inflation rate. The Government, in January 2008, even revised its forecast and assured Singaporeans, as reported by the Straits Times:
The Government has since raised its forecast, saying prices may jump as much as 5 per cent in the early part of this year, with full-year inflation coming in between 3.5 per cent and 4.5 per cent. (Straits Times)
However, five months later in June, the Government revised its forecast again:
The Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore revised their full-year inflation forecast last week to between 5 and 6 per cent – up from an earlier estimate of between 4.5 and 5.5 per cent – citing dearer food and oil. Inflation last month hit a 26-year high of 7.5 per cent. (Property Market)
In October, Minister Lim, from his earlier assurance that inflation would ease in the second half of 2008, turned cautious instead:
Inflation will be a bit sticky over the next few months. But over the next 15 months, we are confident inflation will come down. Therefore, our primary priority right now is to ensure growth. (93.8FM)
Mr Lim got some support from the Monetary Authority of Singapore in the same month (October 2008). The Straits Times in an article headlined, “Inflation to ease next year”, reported:
The MAS expects inflation next year to taper off to between 2.5 per cent and 3.5 per cent, a far cry from this year’s 6 to 7 per cent. Last month’s inflation came in at a higher-than-expected 6.7 per cent on the back of higher housing and electricity costs. (Straits Times)
In the end, what we saw was this:
The Government’s inflation rate forecasts, in the last one year, went from 3.5 and 4.5 per cent to 4.5 and 5.5 per cent to 5 and 6 per cent to 6 to 7 per cent.
And Singapore became the first Asian country to go into a recession.
Singapore‘s Prime Minister Lee Hsien Loong said on Friday the city-state had fallen into recession and the economic outlook over the next 12 months was uncertain. (October, Yahoo News)
However, the Government – again – is forecasting an easing of inflation next year. According to Minister Lim, “in the next fifteen months”. The MAS says, “next year”. PM Lee says the economic outlook “over the next 12 months is uncertain”.
But Minister Mentor Lee Kuan Yew was more upbeat and said the world economy should recover in “3 to 5” years. (938 Live).
But why are inflation forecasts important? Why forecast at all if the economy – both local and the world – is in such unpredictable mode?
I asked my TOC colleague, Leong Sze Hian. “It is important for the Government to calm people’s fears,” he explained. It will also affect how the Government designed the next national budget. For example, financial assistance schemes and wage demands all will be affected by or will depend on the inflation rate. In other words, how much help Singaporeans receive from the Government may depend on the inflation rate. Interest rates may also be affected. “To some extent, interest rates may be generally lower with lower inflation numbers,” said Sze Hian.
Perhaps all this will be reflected in the budget next year. Already, Government ministers are assuring Singaporeans that they will take care of those in need in these bad times.
———–
Below is Leong Sze Hian’s take on the issue of inflation:
TOC deputy Andrew Loh said to me recently:
“With the highest-paid government ministers in the world and we’re the first to enter a “technical recession”. In the first half of the year, ministers were saying that Singapore‘s inflation rate would ease in the second half. Yet, last month, the Minister for Trade and Industry said in Parliament that inflation is expected to ease “over the next fifteen months”.
So, what’s happening on the inflation front?
I refer to the article “Inflation eases for 2nd month” (ST, Sep 24).
According to the Department of Statistics’ (DOS) web site, the CPI in April, May, June, July and August was 109.8, 110.0, 109.7, 111.0 and 111.2 respectively.
As the Year-on-year (YOY) inflation for April was 7.5 per cent, this means that inflation over the last 16 months is 8.9 per cent. (August CPI 111.2 minus April CPI 109.8 plus April CPI YOY 7.5).
So, although the August CPI YOY of 6.4 per cent is lower than the 26-year highs of 7.5 per cent YOY for April, May and June, inflation has not slowed over the last 16 months.
To illustrate the above, something which cost $ 100 in April last year, would have cost $ 107.50 in April this year, and $ 108.90 last month.
For Food, which has the highest weightage of 23 per cent in the CPI, the August YOY was even higher at 8.4 per cent.
For the last 16 months, Food inflation was 11.2 per cent (August 115.3 minus April 112.6 plus April YOY 8.5).
Similarly, Food which cost $ 100 in April last year, would have cost $ 108.50 in April this year, and $ 111.20 last month.
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Everyone, from firms to factories, hawkers to retailers, will be receiving their electricity bill in the next few days. I wonder what the inflation rate will be in the following months.
Its predicted in TW show ‘Sisy’s World’ that oil price may drop drastically soon due to the effect of the F.Meltdown.
When and if that happens:
1. Will Electricity Tarriffs be lowered ? Why not? Where is this additional money going to? Can we have a specifically clear breakdown of the costings involved to address the concerns of the public?
2. Give me any example of price hiked is lowered back after the reason for the hike disappears.
mine bluntly,
Selamat wong k s (khia soo)
Hi Mr Leong & Andrew ,
Thanks on behalf of all who were not aware of multiple changes on the inflation rate predictions.
singapore leaders …….good good ah.
You guys can simply forget about the lowering of the “already approved” electricity price hike even when the oil price dipped to US$50/barrel. Tell me who will want to speak out in their group when they are happily enjoying all that extra profits by paying approving and paying themselves this year end fat bonuses and dividents? In Singapore, whatever price goes up, stays there, whether you citizens are happy or not is not their business, since when did the garment ever bother? Hope TOC keep monitoring them and let the public knows what they are up to again when the time comes.
C! our million $ ministers n PM are so gd in their job! Easy $ rite! I think our ppl sitting in the coffee shop earning hundred or thousand of $ can also make this type or prediction! That y many ppl told me just pay them few thousand dollars they can cum out wf all the policies that our million $ ministers did…..heavy traffic put ERP; no $ help the poor(wat the garment said) increase GST; terrorist run away small frys kana sacked n minister get away wf it; electricity increase petrol increase they said the world increase; cost living increase public transport cost increase they said increase affordable; etc. Good performance, always implement policies on the expenses of it citizen!!
We should (attempt to, with expected failure) appeal to have electrical tariffs reduced.
6) James on November 3rd, 2008 9.13 pm
Who do you suggest to repeal for us?
Which MP ?
LTK / S Lim? Chiam ?
SKH ?
Hallo? any body home ?
For the ordinary blue collar families, students and those recently unemployed,
Things are so expensive – many of them have just stopped buying except for basic necessities.
Transport – especially taxis – is a killer on wallets. So many people have just kind of stop traveling, except in necessity or for work..
Utilities are so expensive – people have kind of cut down till the home is a hot house and few people are talking long conversation on cell phones!
Food is so expensive -more people are eating in.
The very thing that can stimulate the economy [in a small measure] – is the very thing people withhold from.
I am one of them – all the above is true of me!
yah lor, a simple dish costs about $6 liao.
see, people are also having trouble competing in terms of salary :
http://theonlinecitizen.com/2008/11/law-minister-on-minibonds-and-foreign-workers/
Hello Every Things Is So Unbelievably Expensive ,
Welcome to the real developed world – when eating out is a luxury and everyone takes the public transport. Speaking from experiences living in Paris and London.
Cheers,
Eaststopper
Speaking from experiences living in Paris and London – Eaststopper (#9)
But this doesn’t mean things are homogeneously expensive in the UK. Cost of food, energy, rental differs town to town, city to city in the UK, with London topping the chart.
I hope EVERYONE (u know who) knows that all the public are watching on how this electricty tarff will be going come Dec.
I also hope, they will stop using that fwd pricing stuff to explain their poor judgement and lousy deciison making. Well, at this point of time, no one can conclusively say they did a bad job by making lousy decision – as there is no public check & balance!
So all impact of the lousy decisions, i.e entering into the fwd pricing at the PEAK of oil prices, are shoulder by us.
Will see what transpires in Dec08. Will see.
Dear Donaldson,
Yes, cost of living in throughout France and UK is not homogeneous. But when compared across land area, transport links, population density and cost of living, London and Paris is a better comparison than say Birmingham or Toulouse.
I guess my point is that as Singapore attains the status of a developed nation, there will be a certain amount of trade-offs. As a highly export-driven import-dependent economy, we are nevertheless subjected to the ruthless price volatility of raw materials imported from abroad.
Nevertheless, Singaporeans should be proud, and pleased that the huge amount of reserves we have amassed could be deployed in times like this. Think of Iceland, going cap in hand to the IMF and their currency depreciating to levels hardly anyone wants to trade.
Cheers,
Eaststopper
Eaststopper (#13),
Birmingham and Toulouse are part of the real developed world too.
“Welcome to the real developed world – when eating out is a luxury and everyone takes the public transport. Speaking from experiences living in Paris and London.”
Hey in those developed parts of the world and with your experience, do you think that people over there also have the luxury to pay high “prices” for their elected representatives on top of eating out and taking public transport.
To 15,
Singapore is a small nation, whereby mistakes made by elected representatives could potentially have huge negative repercussions for generations. These mistakes could be hugely costly to us. For France and the UK, they have ample resources – land, people, heritage, etc which can soften the blow of any policy mistakes. Higher ministerial pay for Singapore may be a way to ensure that our leaders are well reimbursed for not making big mistakes. (just an opinion here – no flames please)
I do not want to go into a debate about ministerial pay here – I for one feel that our leaders are immensely well paid but considering the flak they are getting from the general public even when they are doing something right, I do think it is not much. Perhaps we could give our leaders more respect and praise if they lower their pay?
Best
Eaststopper
Eaststopper,
Over the years, many like you have worked in and lived in European countries.
most of them told me, although the cost of living is ’1st world’ there,
their pay is also 1st world , not so low like asia. For convenience lets compare 2 consultants having the same skills and same experience, but 1 lives in Asia (ex-Japan, Australia, S.Korea) and the other in Europe (UK / Swiss / France / Belgium / Germany).
My friends say European worker’s net income after tax is still greater than the Asian counterpart. Also their currencies are stronger.
Eaststopper, in Singapore, are we earning 1st world salary? Or salary in general shall remain competitive in favor of foreign direct investments?
If its to prevent mass exodus of FDI, then its understandable – it shows singapore’s heavy reliance on FDI to survive.
But should cost of living go up and up ? Is it progress when cost of living goes up? Its easy to up the cost of living. Anyone can do that. Just hike. But is there a solution to provide 1st world salaries in tandem with the already record living cost? We are looking at salaries in general and not rare specific cases.
Obviously, if Cost of Living increase much much faster than Salary, is that to be considered as progress to the employees? Does this not mean the net income decreased? simple maths? also remember to include inflation.
While its easy to sing the praises, lets not ignore and elaborate on the ‘bad news’. Lets demand for Solutions from world class renumerated employees.
If europe boleh, why not some developed asian countries? What is the reason? Talents are there to create solutions right? Problems and constraints can always exist. Solution is what solves problems.
I always hear that SIngaporeans complained about the high cost of living. This may be so if your salary is not in the blanket of between $3000 to $5000 a month.
Naturally, the blue collared and unprofessional workers have more cause for complaint especially against the GST which affected the poor and the rich equally.
Here in Sydney, the cost of livng is also atrocious. I thought Singapore was expensive until I came here a few months back. A cuppa costs around $3.00, the cheapest paper $1.00, a one-way train journey costs around $2.50 and a meal outside around $8.00. Eating out is a luxury and we have to cook at home most nights. Taxis are avoided as a short 10 minute trip can set you back by ten dollars and above. Services from plumber and electrician are also expensive to the tune of $50-70 dollars per visit charge by the hour. A trip to the GP will cost you up to $75 excluding medicine but if you have the medicare card, you can claim around $40 back from insurance. When I returned home last month, everything in Singapore looks so cheap as compared to Sydney!
Of course one can argue that the salary is higher here and that offset the higher cost in living. Nevertheless, the tax is equally high here with a minimal tax bracket at 28 % to the highest bracket at 48% for the higher income ($200,000 and ablove). The tax is also less off from your pay packet monthly and so you spend what you have left in your account which is not a bad thing considering that you can spend away everything you have.
The mortgage interest rate a few months ago shocked me. It was at an average of 8% per annum and people were complaining away. Banks here make an average of 1 billion dollars before tax annually and were the abusive target of suffering consumers. The mortgage rate has since slipped due to the economic crisis. FD deposit rate also fall in tandem to around 4.5%. It used to be around 7% and some even give higher to attract cash deposit.
So I guess next time when you lamented at Singapore’s cost of living, do remember poor me in Sydney!
Dear Mr Ah Cheow,
I do not have privy to salaries or incomes of work done by Europeans and Asians on the same job so I can’t really comment on pay scales. But what I can tell you is that there is a fair amount of jobs which are being off-shored silently to Asia due to the lower costs. Privately, more work is outsourced to Asian countries and I do not believe the trend is reversible. The result is more work available here in Asia than in Europe.
Regarding top salaries, I believe there is a layer of skill sets which can command international rates regardless of geographical locations. Skills not restricted just to simply domain knowledge but also personality and attitude. If I look across this layer, employers are willing to pay top dollar for these set of talents regardless of where they are based.
Your concern about salaries not rising in tandem to cost of living is definitely true and I agree with you. This is however a trade-off we have to live with as we are connected to the global market where most of our salaries will be pegged with the rest of the world and where an influx of top layered people drives up the overall cost of living. This is happening not just in Singapore but all across the world.
This is the reality we will have to face as a nation. And the lesson we should take away is that our people should, as much as possible, be given the right set of skills and opportunities so that they will rise upwards to the layer of people whereby international rates apply. This, we have to achieve together as a society and as a nation together, not simply on the efforts of the government alone.
For some, the harsh reality of globalization will be felt, and this, I agree, the government should and would have to help soften the blow.
Best
Eaststopper
With all the million dollar Ministers and top civil servants
yet Singapore is the first nation in Asia to fell into recession!
Just shocking! This is deflation not inflation.
Are they the best in Singapore?
Twisted brains.
Already, Government ministers are assuring Singaporeans that they will take care of those in need in these bad times.
Unfortunately, with the multiple changes in projections, it does induce some sense of danger in the air.
Not that they could really be blamed though.
19) Eaststopper on November 4th, 2008 8.03 pm
……………..Your concern about salaries not rising in tandem to cost of living is definitely true and I agree with you. ……..
I am glad you agree.
………………..This is however a trade-off we have to live with as we are connected to the global market where most of our salaries will be pegged with the rest of the world and where an influx of top layered people drives up the overall cost of living. This is happening not just in Singapore but all across the world.
This is the reality we will have to face as a nation. And the lesson we should take away is that our people should, as much as possible, be given the right set of skills and opportunities so that they will rise upwards to the layer of people whereby international rates apply. This, we have to achieve together as a society and as a nation together, not simply on the efforts of the government alone.
For some, the harsh reality of globalization will be felt, and this, I agree, the government should and would have to help soften the blow.
………………….
That is why I am asking for SOLUTION. Our leaders are ‘a cut above the rest’. Is that not why they are paid the BEST? Is that not the FACT? Its good to demand the BEST from the BEST. 1st world workers not earning 1st world salary (for workers in general) and Cost of Living really 1st world – this is a problem, which is the mudder of all Solutions. Why do companies pay a lot for consultants? To fix a problem and they are expected to fix it. 1st world people should be paid 1st world salaries based on evidence from Europe and USA and the other 1st worlds.
While its understandable there is Constraints and heavy reliance on FDI, the basic issue here I have is
why is 1st world people not paid 1st world salary? whatever is given as reasons, lets see the SOLUTION.
Hey all,
I believe everyone out there knows that there is a big “problem’ out there waiting to be sloved.
What I personally wants to hear are NOT reasons from our “ministers” telling us why you are in this situation. Worst when all reasons seem to be pointing to outside sources (the financial tsunami). No taking of ownership, no leadership quality!
What I wish to hear are Solutions! Dun tell us we cannot sent all FTs/FWs back home!
I believe NONE are asking for that at the first place, JUST BE SELECTIVE!!
I somtime wonder whether our leader can get what the message on the ground ? If they cannot even get messages right, howcan they be expected to slove the problem?
Time to use the coffer !! if this one in a century financial crisis still cannot warrant the use of our reserve, then we might as well kiss good bye to our reserve.
Our many ministers are a bunch of excellent sales people who excel also in black magic to churn out magical inflation numbers that even 4D punters have a hard time to pick up 1-2-3 winners, besides selling you Minibonds as safe investments when they themselves do not invest with their own money but money belonging to others (town councillors investing with residents money).
So whats the conclusion, fellas?
@16 – “I do not want to go into a debate about ministerial pay here – I for one feel that our leaders are immensely well paid but considering the flak they are getting from the general public even when they are doing something right, I do think it is not much. Perhaps we could give our leaders more respect and praise if they lower their pay?”
They are getting all the flaks because they market themselves as the creme de la creme commanding salaries pegged to the top 6 of a few well chosen profession, which BTW may never come down. If Ah Kow had a hard year, Ah Ter comes along and propped the salaries up! So, expecations for them to deliver is sky high, and when they don’t, well the fall is hard.
“which BTW may never come down. If Ah Kow had a hard year, Ah Ter comes along and propped the salaries up! So, expecations for them to deliver is sky high, and when they don’t, well the fall is hard.”
Yah lo, you can pegged to the highest, median or even lowest. It just means it is the performance of those people to whom it is pegged not your performance.
@10 – “Welcome to the real developed world – when eating out is a luxury and everyone takes the public transport. Speaking from experiences living in Paris and London.”
The difference is that in these places, the wage gap is much much lower than in SG, perhaps because of a minimum wage in London/Paris. Here you can still get relatively cheap labour (thaks to foreign workers?). U can still get a meal for $3.00 at a hawker centre. The closest equivalent in Paris would be Mac meal @ 7 – 8 Euro (can’t recall the cost now).