Singapore’s inflation rate reached a high of 6.7% in June 2022. This is based on the CPI-All Items inflation. For those of us wondering about the difference between this and the MAS’ Core inflation which came in at the lower 4.4%, we had answered this previously in What’s The Difference Between Headline Inflation and Core Inflation? In a nutshell, CPI-All Items includes housing and car prices.
Yet, even as Singaporeans feel the pinch of higher prices with rising inflation, the truth is that inflation goes beyond our sunny island. The world is grappling with global inflation driven by rising energy prices and supply chain disruptions, and some countries have it worse than us.
Here’s how Singapore’s inflation rate compares with other countries in the first half of 2022.
Note: the reference inflation rate of June 2022 will be taken as comparison where possible from OCED data. For consistent comparison, we used the June 2022 inflation number even if the July 2022 inflation rate is available for some countries.
What Is Driving Global Inflation?
The world’s global inflation rate stood at 3.4% at the end of 2021 according to World Bank’s data. While this was an increase from the prior year of 2020’s 1.9%, it was far from the peak of 9% in 2008 since the turn of the millennium in 2000.
However, few would have predicted that Russia would invade Ukraine, triggering a shock increase in food prices and propelling energy prices to soar. This is on top of the pandemic induced supply chain disruptions that are slowly being restored. Now that most of the world has resumed their pre-pandemic lifestyles and loosened the strict border control put up to stem the pandemic, growing consumer demand has also outstripped supply, leading to higher prices.
Inflation Rate For United States Was 9.1% In June 2022
One of the most watched inflation number, US. is also grappling with inflation which reached a high of 9.1% in June 2022.
Currently, the inflation report has an outsized effect on the US equity market and correspondingly on the global market. Better than expected inflation data would raise hope that the Fed would ease on increasing interest rates while worse than expected inflation data could trigger a sudden downturn in the markets.
While Singapore’s inflation rate is lower than the US (for now), we cannot afford to ignore what their central bank (the Fed) does in face of new inflation data. Any rise in interest rate by the Fed would affect the global interest rate condition and in turn, interest rates in Singapore.
Read Also: What A 1% Increase In Interest Rates Could Mean For Your Home Loan Repayment
G7 Economies Had An Inflation Rate Of 7.9%
Including the US, the G7 economies faced an overall inflation of 7.9% in June 2022.
Canada faced an inflation of 8.7%, more than double from 3.4% in 2021. France had a more manageable 5.8%, up from 1.6% in 2021. Germany dealt with inflation of 7.6%, up from 3.1% in 2021. Italy grappled with inflation of 8.0%, a jump from 1.9% in 2021. The United Kingdom also faced inflation of 8.2%, up from 2.5% in 2021.
Only Japan’s inflation remained low at 2.4%. However, to the Japanese, this is relatively high when their economy has been struggling with deflation (negative inflation) for much of 2020 and 2021.
Overall, Singapore’s inflation rate is lower than most of the G7 countries except for France and Japan.
China’s Inflation Rate Is 2.5% In June 2022
Looking at China, inflation was 2.5% in June 2022. This is an increase from 0.9% in 2021. This is still within Beijing’s inflation target of “around 3%” for the whole of 2022. The July reading of 2.7% hit a 24-month high for China’s inflation rate but remains low by global standards.
The low inflation, which suggests weaker overall growth, may be a concern for China as strict pandemic lockdown protocols have affected overall economic activity.
Indonesia And Malaysia’s Inflation Rate Are 4.3% And 3.4% Respectively
Closer to home, our neighbours, Indonesia and Malaysia are also affected by global inflation but less severely compared to Singapore.
Indonesia’s inflation rate was 4.3% in June 2022, up from 1.6% in 2021. Malaysia’s inflation rate was 3.4% in June 2022, up from 2.5% in 2021
In comparison, Singapore faced a higher inflation rate of 6.7% in June 2022. The nature of our open economy makes us susceptible to imported inflation. This difference in how our neighbours can deal with inflation was illustrated by the export ban of Malaysian chicken to Singapore. To control prices of chicken in Malaysia, Malaysia was able to impose an export ban and keep domestic prices stable. However, Singapore, which does not have a domestic supply, must turn to alternative sources, and accept higher imported prices.
Turkey Has One Of The Highest Inflation Rate At 78.6% In June 2022
Thankfully, for Singaporeans, we don’t have to grapple with our money losing half its value in a year.
Of all the OECD countries, Turkey has the highest inflation rate of 78.6% in June 2022. This is a startling increase from their 2021 inflation rate of 19.6%, which was still the highest amongst OECD countries. This eyewatering increase is attributed to Turkish President Erdogan’s policy of pursuing low interest rates, according to a Bloomberg analysis.
Unlike other central banks which have tightened monetary policy in the face of global inflation, Turkey cut its policy rate by 500 basis-points to 14% in an easing cycle last year. According to economic logic, this would worsen the issue of inflation which proved to be true as Turkey is facing one of its highest periods of inflation.
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