Inflation in Singapore

A short history of inflation in Singapore

The Oil Shock (1973 to 1974)

Singapore's inflation peaked at 34.3% in the year to March 1974. A city state that grows almost no food and produces no oil is more exposed than most to a simultaneous commodity and energy shock, and the 1973 embargo delivered both.

Managing the Exchange Rate (1981 onwards)

What Singapore did afterwards is unusual. Since 1981 the Monetary Authority of Singapore has conducted policy through the exchange rate rather than through interest rates, managing the Singapore dollar against a basket of its trading partners' currencies. For an economy where imports are a large multiple of what is produced domestically, the exchange rate is the most direct lever on the price level, and interest rates are largely set by world markets in any case. Inflation has been low and stable for four decades under that arrangement.

Post-Covid Inflation (2021 to 2023)

In Singapore, prices rose fastest in September 2022, at 7.5%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.