Singapore Expects Financial Stability Against Odds
According to the Monetary Authority of Singapore (MAS), there is a risk that the country will face “rock-bottom interest rates” and a property bubble – but our monetary policies are keeping it at bay.
Rising Property Cost
The MAS noted that the prices of properties in Singapore – as well that of similarly developed countries like Taiwan and Hong Kong – have risen an average of 52% since 2009; yet, nominal wages from the same period has increased by only 13%. However, it was also noted that prices for residential properties have at least been stabilizing: in 2010, the increase was as high as 18%, but it was down to only 2.8 last year.
Low Fertility Rate
The risk of inflation is affected by a low increase of available workforce. For the last two decades, the fertility rate of Singaporeans is only 1.4. As people in the Baby Boomer generation have started to retire, the country is faced with a shortage of labor source. With fewer works, labor price will increase, and if left unmitigated, so will the prices of commodities.
Solutions to Problem
If company owners can’t increase wage rates, there are three other solutions: focus on businesses that utilizes less labor, use technologies that minimize labor requirement, or hire cheaper foreign labor. Notably, many businesses have already started to adapt these measures. The MAS believes that inflation will temporarily increase as these measures are tried out, but will return to a more comfortable level once they begin to work.
Wall of Monetary Policies
The country’s monetary policy – centered on exchange rate – viably protects the whole industry from unexpected or drastic inflation. This is evidenced by Singapore’s much lower increase in oil and food and beverage prices: the global average in increase is 16% and 8% for oil and food and beverages; while the country has only increased by 9% and 2%, respectively.