SINGAPORE'S economy will benefit from lower oil prices since the country imports more oil than it exports, said Minister for Trade and Industry Lim Hng Kiang in Parliament yesterday.
Cheaper oil will reduce electricity and fuel costs for consumers and businesses here, leaving them with more to spend on other products and services.
Their higher purchasing power could help stimulate the economy, Mr Lim said in response to queries from MPs about the effect of the oil price fall on Singapore.
The price of benchmark Brent crude oil has fallen from a peak of US$115 a barrel last June to slightly less than US$50 a barrel now.
The price drop would also have a "small, benign effect" on overall inflation, which is likely to come in lower this year, said Mr Lim.
Overall inflation is tipped to be 0.5 per cent to 1.5 per cent this year, down from an estimated 1 per cent to 1.5 per cent last year.
But Mr Lim cautioned that core inflation, which excludes private road transport and accommodation costs, "will remain rather sticky".
Core inflation, which is seen as a better gauge of everyday expenses, will be propped up by higher wage costs from the economic restructuring exercise.
It is expected to be 2 per cent to 3 per cent this year, compared with an estimated 2 per cent to 2.5 per cent last year.
On the impact of cheaper oil on different sectors, Mr Lim said the petrochemical sector will benefit from cheaper raw materials, but its profit margins will remain "very tight".
Product prices in the sector have fallen along with oil prices, leading to lower revenue for petrochemical firms, he said.
While the prospects for the offshore and marine sector remain "OK for the immediate future", they may be affected if oil prices stay low over the long term.
Separately, Mr Lim said the Singapore dollar's recent fall against the United States dollar and rise against the euro "are not expected to have a significant impact on Singapore's economy".
He noted that the Monetary Authority of Singapore manages the Singdollar exchange rate against a basket of currencies, and does not focus on the Singdollar's value against any specific currency.
This article was first published on Jan 20, 2015.
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