INFLATION RATE FOR 1990 (Forecast)

Mr Chng Hee Kok asked the Minister for Trade and Industry what is his forecast of the inflation rate for 1990 and how his Ministry is monitoring the price increases of essential services.

The Minister for Trade and Industry (BG Lee Hsien Loong): Mr Speaker, Sir, for the first nine months of 1990, the average inflation rate was 3.4%. The Ministry of Trade and Industry (MTI) expects the inflation rate for the whole of 1990 to be between 3.6% and 3.7%. This is higher than Singapore's rate in recent years, but is still among the lowest in the world. We have been able to cushion ourselves to some extent from the effects of the Gulf crisis.

The other NIEs expect inflation rates of between 5% and 10%. Among the developed countries, only the Netherlands, Japan and West Germany expect inflation rates of below 3%. Even among the oil-producing countries in the region, inflation will be higher this year than last year.

MTI monitors the prices of essential commodities through monthly returns from traders. These commodities include petrol, rice and other basic foodstuffs. The Department of Statistics also monitors prices of a wide range of goods and services through mail enquiries and field work. Apart from keeping tabs on prices, MTI monitors the impact that price changes have on business operating costs and on general inflation.

In a free market economy, prices of all goods and services are set by the market. The best way to hold prices down is not to control prices, but to ensure that sufficient supplies are available, and that no cartels or monopolies can corner the market. This MTI is doing.

If world energy prices go up, so will domestic energy costs. When oil prices rise, costs of bus, taxi and MRT fares, electricity and gas tariffs also have to rise. Singapore imports all our oil, and has no domestic sources of energy. Every $1 increase in oil prices means that Singaporeans as a whole are poorer off by $60 million per year. Oil prices have risen by more than $20 in the last year, and so we are collectively $1.2 billion poorer off each year. Higher inflation is just the way this unpleasant fact manifests itself. But so long as we remain competitive, we can keep up economic growth, and in time make up for this temporary drop in our standard of living.