The Straits Times (6 Jul 2022) : Cushioning the impact of rising inflation06 Jul 2022
Inflation is a serious source of worldwide concern the effects of which are being felt in Singapore, not least because of its exposure to a global economy that forms the bedrock of its domestic economy.
Central banks in many developed countries have been scrambling to tackle inflation. The Monetary Authority of Singapore has been vigilant and acted in a timely manner. Nevertheless, many Singaporeans are feeling the pinch of rising prices, which understandably has created a degree of concern over the sudden rise in the cost of living.
The Government has responded to global trends with the $6.6 billion Assurance Package, announced in 2020, which was augmented by a $1.5 billion package revealed recently.
These initiatives seek to reduce the inflationary load on ordinary citizens with an eye to the particular needs of the most vulnerable among them economically. Reassuringly, Parliament heard on Monday that more will be done to help cushion the impact of the goods and services tax (GST) hike if the economic situation worsens significantly. Understandably, questions will arise over the advisability of a general tax increase at a time of rising prices, but the reality is that Singapore will require more fiscal resources to fund many public needs in the years ahead.
In other words, its tax regimes must be aligned to its future needs even as it battles immediate challenges. Inflation is compounding the impact of tax adjustments by way of the GST, but the short-term pains will lead to long-term gains to be made from a sustainable economy. If the going gets tougher, the official promise of more help on the way will ease the transition from the inflationary woes of today to an economy buoyant enough to sustain employment and purchasing power in a rapidly ageing Singapore.
No matter how trying current circumstances might be, Singapore's approach must remain that of using short-term relief in order to support longer-term economic restructuring. Its fiscal measures must contribute to incentives for businesses to build their capabilities and become more energy-efficient and productive. Together, the additional measures in the latest package and those announced previously amount to considerable support for households and businesses.
With careful fiscal planning, Singapore will continue to be in a position to cushion citizens from extreme global inflation, target help to reach those who need it most, and help businesses adjust to higher prices into the medium term. The international outlook is uncertain, not least because of the war in Ukraine and underlying tensions between the United States and China that have come to the fore. Singapore is unable to do much about such developments, but it can work to keep its own economic house in order.