“Global supply chain frictions and consumer goods inflation in the advanced economies have continued to ease,” said MAS and MTI, adding that global energy and food commodity prices also moderated further.
“As a result, prices of Singapore’s imported goods have continued to decline on year-on-year terms.”
Locally, unit labour costs are expected to rise further in the near term and businesses are expected to continue to pass through accumulated labour costs to consumer prices. MAS and MTI noted that it would happen at a “more moderate pace” amid a slowdown in domestic activity.
Core Inflation is expected to moderate further in the second half of the year as imported costs are reduced and the current tightness in the domestic labour market eases, they added.
At the same time, the increase in COE quota and supply of housing units available for rental, private transport and accommodation inflation are expected to moderate over the course of the year.
For 2023 as a whole, the authorities project headline inflation to average between 5.5 per cent to 6.5 per cent and core inflation to average 3.5 per cent to 4.5 per cent.
Excluding the transitory effects of the 1 percentage point increase in the Goods and Services Tax to 8 per cent, headline inflation is expected to come in at 4.5 per cent to 5.5 per cent. Core inflation is projected to come in at 2.5 per cent to 3.5 per cent.
“Upside risks remain, including from fresh shocks to global commodity prices and more persistent-than-expected tightness in the domestic labour market,” said MAS and MTI.
“At the same time, there are also downside risks such as a sharper-than-projected downturn in the advanced economies which could induce a general easing of inflationary pressures.”