SINGAPORE (April 19): Businesses in Singapore are bracing for higher costs in a country that’s already among the world’s most expensive to live in.

From a 30% increase in water prices to higher diesel costs to a looming carbon tax, manufacturers are being forced to adjust their operations to remain competitive in an economy that’s only recently recovering from an export slump. It also signals a pick-up in inflation, an outcome the central bank flagged in its monetary policy statement last week.

Of the measures announced by Finance Minister Heng Swee Keat in his February budget, higher water tariffs have generated the most debate and anxiety among Singaporeans. Having kept the cost steady since 2000, Prime Minister Lee Hsien Loong is clear why the government needs to adjust prices: as an island nation that’s water-stressed, the state needs to pay for expensive desalination plants. Higher prices will also make consumers more aware of their usage of the scarce resource.

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