Singapore has begun 2021 on a positive note, with headline inflation coming in positive in January after months of being in the red.

Headline inflation – which measures the total inflation in the economy – edged up by 0.2% y-o-y in January, according to the Consumer Price Index (CPI) released by the Department of Statistics (Singstat) on Feb 23.

This is up from the 0% posted in December 2020 and follows an increase in the prices of accommodation and transport.

Meanwhile, core inflation – which gauges price increments to sectors other than accommodation and private transport – edged up to -0.2% y-o-y from -0.3% in the month before. 

This follows a smaller decline in services costs, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) detail in a joint release.

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Prices from the services sector was down by -0.3% y-o-y from -0.8% in December 2020 due to higher tuition and other fees and point-to-point transport service costs.

Conversely, the prices of retail and other foods fell at a slightly steeper pace of -1.3%, from -1.2% in December. MAS and MTI attribute this to larger declines in the prices of personal care products and clothing & footwear.

A similar trend was observed in the -9.7% decrease in the prices of electricity & gas in January, compared to the -6.7% dip posted in the month before.

This was in response to the downward revision in electricity tariffs.

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Food inflation – while expansionary – also edged down to 1.5% in January, from 1.6% in the month before. This comes as the prices of non-cooked food and restaurant meals had risen at a more moderate pace.

Price increments were seen across the other segments reflected in the CPI computation. The biggest jump was seen in private transport inflation which rose to 1.9%, from 1.2% in December.

This is due to a larger increase in car prices as well as a more modest fall in petrol prices.

Accommodation inflation similarly picked up to 0.5% in January as housing rents increased at a faster rate due to the expiry of rental rebates given to households living in public rental flats.

Households living in public rental flats received 50% rental rebates from October to December 2020 as part of government measures to help households cope with the economic impact of the pandemic.

For comparison, accommodation inflation had come in at 0.3% in December 2020.

Touching on the inflation levels for 2020, MAS and MTI note that both the core and headline price gauges had averaged at -0.2%.

Looking ahead, the authorities expect core inflation to average between 0% and 1%, while headline inflation is expected to fall between -0.5% and 0.5%.

“Core inflation is forecast to turn mildly positive this year, as the projected rise in oil prices from a year ago leads to a pickup in the oil‐related components of the CPI and the disinflationary effects of government subsidies introduced in 2020 fade,” the authorities say.

In line with this, they foresee a gradual increase in domestic inflation, in tandem with the recovery in Singapore’s economy. 

Signs of these can already be seen. For instance, accommodation costs have stabilised with housing rents in some areas increasing, MAS and MTI note.

Similarly, they note that private transport costs have risen on the back of firm demand for cars and higher petrol costs.

Meanwhile, on an external front, the authorities expect inflation to pick up amid the recovery in global oil prices. Brent crude oil prices have risen further since the last quarter of 2020 following output cuts among the Organization of the Petroleum Exporting Countries (OPEC).

Additionally, “continuing negative output gaps in Singapore’s major trading partners should cap the extent of the increase in underlying global inflation,” MAS and MTI add.

Private sector economists are largely in agreement with this. 

Sin Beng Ong, from JPMorgan Chase’s emerging markets Asia, economic and policy research team expects core inflation to turn gradually positive in 1H2021. 


In this time, he expects employment to “recover with a lag, following a decline that has surpassed that of the 2008 crisis”.

“As with output, the bulk of the employment decline has come from the non-manufacturing sectors, and given the anticipation of a multi-speed recovery across the various service sectors, we expect the employment recovery to be similarly variegated,” adds Ong.

This resonates with economists at RHB’s Singapore research team. 

Ong and RHB’s economists predict that the MAS will keep the S$NEER (Singapore Dollar Nominal Effective Exchange Rate) at a 0% appreciation path at its upcoming April review.

This is due to the gradual recovery in economic activities and muted inflation outlook, they add.