Wednesday, May 21, 2008

High Inflation, High Cost of Operations, High Prices. Is There A Way To Fight This Vicious Cycle?

Singapore's consumer price inflation likely hit a new 26-year high in April as food and energy prices showed no signs of cooling.

A poll of economists forecasts the consumer price index to have risen 7.0% from a year earlier. In March, the CPI rose 6.7%.

Forecasts for the data, due Friday at 0500 GMT, ranged from 6.7% to 7.3%.

Economists said rising energy prices led to higher pump and utilities prices, while a global rice shortage caused the price of the grain to surge.

"Petrol companies raised pump prices by three and five cents a liter for petrol and diesel respectively," said Leon Hiew, an economist at Citigroup in Singapore.

Global rice costs have risen by 80% over the past three months, added Hiew. World Bank Managing Director Juan Jose Daboub said recently that prices are unlikely to fall soon unless an additional million tons of rice is released into the global market in the near term.

According to Hiew, inflation is unlikely to cool until the second half of the year.

"We expect CPI to stay within the 6.5% to 7% range in the second quarter before moderating to average around 4.5% in the second half," Hiew said.

The poll also forecasts the CPI to have risen 0.6% from March in seasonally adjusted terms, after rising 0.3% the previous month.

Will the Singapore Government Step And Introduce Policies to Combat the Inflation?