SINGAPORE — The downside economic risks faced by Singapore have “increased significantly” due to the ongoing Russia-Ukraine crisis, said Trade and Industry Minister Gan Kim Yong on Monday (28 February).
Speaking during the debate on Budget 2022 in Parliament, Gan said the crisis has clouded Singapore’s economic outlook. At this point, it is difficult to estimate the impact on Singapore's gross domestic product (GDP) and inflation, he added.
The economic impact will depend on how the conflict unfolds, the global response to the situation, and the long-term impact on the global economy, Gan said.
“However, what is clear is that inflationary pressures are likely to rise further in the near term, especially through an increase in the prices of oil-related items in the first instance.”
Singapore will be “significantly impacted” by higher energy costs due to the crisis as it imports most of its energy needs, Gan said. Global oil and gas prices have spiked in recent months while the Brent crude benchmark surged to above US$100 a few days ago, he pointed out.
Motorists must expect pump prices for petrol and diesel in Singapore to rise. Electricity rates for both businesses and households will also increase in tandem with escalating global energy costs. “These will undoubtedly impact Singaporeans and further raise the cost of living here,” Gan said.
The crisis will also further strain global supply chains as Russia and Ukraine are major exporters of commodities, such as wheat and metals like nickel and palladium. Supply disruptions for these commodities will raise prices of related goods.
Impact on trade and investment
The Singapore authorities are working with key companies to review their business continuity plans to minimise disruptions to their business operations.
“We must also be prepared for the follow-on impact on trade and investment flows. The conflict will affect business confidence and weigh on global economies, and impact recovery from the pandemic,” Gan said.
Singapore has earlier projected GDP to grow by three per cent to five per cent this year, with the Consumer Price Index for all-items inflation ranging between 2.5 per cent and 3.5 per cent, and the core inflation between two per cent and three per cent.
Gan also referred to the Ministerial Statement issued by Foreign Affairs Minister Vivian Balakrishnan in Parliament earlier Monday on Singapore joining the global community in imposing sanctions and restrictions on Russia.
“These measures will certainly come at the cost to us too, but I hope Singaporeans will understand why we need to make a clear stance even if there is a price to pay, as Minister Balakrishnan has explained,” Gan said.
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