Singapore inflation forecasts for 2015 and 2016 lowered

Latest CPI inflation was last at -0.6% (YoY) in Sep15. In fact, the headline number has continued to surprise on the downside and has been stuck in the negative level for eleven consecutive months. Economic slowdown and a whole slew of supply-side policy measures have weighed down on domestic inflation. Externally, energy and commodity prices have slumped on the back of an uncertain global outlook. In fact, such disinflationary pressure is building up in the global environment given recent deceleration in China. Barring a strong recovery in the US or the Eurozone, which is unlikely at this juncture, global disinflationary pressure will continue to take hold.

"We have lowered inflation forecasts for 2015 and 2016 to -0.4% and 0.5% respectively", says DBS Group Research.

Indeed, the risks in the global economy and their corresponding impact on global energy and commodity prices have significantly lowered the inflation trajectory for the Singapore economy. Moreover, domestic wage pressure arising from the labour crunch has also dissipated given the dicey growth outlook. In this regards, CPI inflation is expected to remain in the red until mid-next year, before base effect brings the headline number above water. As such, full year inflation is likely to average -0.4% in 2015 and 0.5% in 2016. These are down from the previous forecasts of -0.2% and 1.3% respectively.