Inflation to hit Singapore harder than US economic slowdown

Source : Channel NewsAsia - 8 May 2008

Inflation is a more serious problem for Singapore and other Asian economies than an economic slowdown in the United States, according to HSBC’s senior Asian economist, Robert Prior-Wandesforde.

He said if inflation continues to push upwards, Asia could find itself facing an economic slowdown next year. His comment came at a seminar organised by the Singapore International Chamber of Commerce.

Inflation in Asian economies has been on a relentless move upwards, with Singapore seeing inflation rising at its fastest pace in more than 26 years.

HSBC said the Singapore government appears to be tackling inflation well, but external factors are key when assessing the overall outlook.

Mr Prior-Wandesforde said: “Singapore isn’t too badly placed; I think we can manage this reasonably well. The countries that I’m more worried about would be some of the lesser developed countries, where inflation is starting to get a bit out of hand.

“The governments and central banks are going to need to do something about that. That means pressure on growth eventually, and that could be the bigger danger for Singapore as we go into 2009 and 2010.”

He said inflation is a bigger worry than the anticipated slowdown in the US because as a whole, Asia is still expected to show robust growth, led by economies such as China and India.

He added: “Asia has survived what has already been a reasonably big US downturn surprisingly well. In fact, some Asian countries have picked up at exactly the same time as the US has been slowing down.

“I do think there’s a possibility that the reverse could happen with these various commodity price shocks having a bigger impact on Asia than the Western world. Asia is slowing down more aggressively in 2009 (and) 2010, at exactly the same time as the US picks up.”

Prices of commodities such as oil and rice have been surging, leading to protests in Thailand, Vietnam and the Philippines. - CNA /ls