S'pore inflation expectations fall in wake of weak global economic outlook

PHOTO: S'pore inflation expectations fall in wake of weak global economic outlook

SINGAPORE - Singapore consumers are expecting inflation to fall as they perceive that a weak global economy would likely have a dampening effect on inflation.

This is according to the latest findings of the SKBI-MasterCard Singapore Index of Inflation Expectations (SInDEx).

The index - jointly developed by Singapore Management University's Sim Kee Boon Institute for Financial Economics (SKBI) and MasterCard Worldwide - is derived from an online survey of around 400 randomly selected individuals from Singapore households.

In the latest survey conducted in December 2012, consumers shared their views on perceived values of economic variables over the next one to five years.

Comparing the two waves of surveys conducted in September and December 2012, consumers expect inflation to moderate in the next 12 months.

Dr. Aurobindo Ghosh, co-creator of SInDEx, and Programme Director of SMU SKBI said, "Even though the United States possibly avoided falling off the fiscal cliff, many Eurozone economies are tittering on the brink of continued slowdown in productive activities and persistently high unemployment.

"This has created a downward pressure on global demand which in turn has manifested in low inflation rates in many Western and regional economies. Furthermore, low inflation has prompted policymakers to continue to adopt an expansionary monetary policy and more stimulus spending to kick start growth and employment generation.

"The concern of a spike in inflation expectations post the third sequel to Quantitative Easing (QE3) in the US seems to have subsided somewhat, with the medium term inflation expectations in Singapore projected to come down in reaction to slowing trends in global demand."

He added that in the medium term, despite the turmoil in the global economy, the results show how grounded Singapore households are, so much so that even the professional forecasters with access to data and relevant market knowledge find it hard to beat their expectations.

Dr. Yuwa Hedrick-Wong, global economic advisor, MasterCard Worldwide said: "Global economic recovery is stabilizing at a lower growth trajectory. Global demand as reflected by growth of world trade remains weak, which is an unfavourable external environment for many key markets in Asia/Pacific that are export-oriented."

He observed that as a small, open, and trade-oriented economy, Singapore is also in a weaker position to leverage domestic demand for growth.

He said that retaining its international competitiveness as a regional and global hub of finance and high-end services is therefore crucial for Singapore.

"In this context, rising inflation in general and wage inflation in particular could have far reaching impacts," he said.