Inflation in Singapore hit 6.5% in 2008
I first saw this on The Online Citizen.
A report by the AFP is just out saying that Singapore’s inflation rate hit 6.5% in 2008, the highest in 28 years. This is particularly worrisome, given that our economy contracted for the later three quarters of 2008. What’s even worse is that Singapore’s bottom 20% income group experienced a higher 7.4% inflation rate. Bloomberg News reported on Feb 18th 2008 that Singapore appeared headed towards stagflation, or the dreaded combination of slowed growth coupled with rising costs. In hindsight, it looks like they were spot on.
Among other things, the Bloomberg article points out that:
Nonetheless, a prudent course may not be a very popular one in an environment of stagflation. When people start losing their jobs while their electricity bills keep going up, there may be resentment against the rich, many of whom are foreigners.
Singapore is too pragmatic to want to use tax policies to fashion a more egalitarian society. Even this year’s budget gave a bonus to the rich by scrapping estate duty.
The move is aimed at getting wealthy individuals around the world to shift their assets to Singapore, where there are no levies on capital gains and the top rate for personal income tax is 20 percent.
But why be so concerned about rich people putting money into Singapore, a reader of this website asked? Can anyone who puts money into our pockets for safekeeping harm us? The simplest answer is yes.
With the explosion of foreign funds in Singapore came inflation. Many will remember how property values skyrocketed earlier this year. Rental, both for office as well as residential space, doubled overnight in some areas. And with restrictions on foreigners purchasing property scaled back, property sale prices also ballooned.
The escalation of property prices increased inflationary pressures. The Consumer Price Index hit 6.3 percent in the recent past, a record high in more than a quarter of a century, wiping out gains made in income increase of about 3 percent. Of course other factors, such as oil prices, contributed to the increase in prices but there is no gainsaying that the influx of wealthy foreigners played a major hand in adding to inflationary woes.
What about jobs? Doesn’t increased wealth mean more jobs for Singaporeans? Yes and no. More jobs are created when foreign funds come in but many of these jobs don’t go to Singaporeans. In 2007, more than 60 percent of the jobs created went to foreigners. As of that year, one in three workers in Singapore were not Singaporeans.
Now you may not think highly of Chee, apart from the occasional portrayal of him by the state media as an attention-seeking pro-human-rights-and-nothing-else activist. Personally I’m unsure I would vote for him. But what he has written in above agrees strongly with the Bloomberg news report. Economic growth in Singapore should never be a bunch of statistics which simply indicate an upward trend in GDP; the real income growth of the middle and lower income groups matter much more strongly. I’ve asked the same rhetorical question as Chee implicitly did to many others: How exactly do Singaporeans benefit when foreign MNCs hire foreign workers (who remit the bulk of their allowance back to their home country with minimal spending here) to manufacture products bound for foreign markets? If we don’t know the answer to this question, it’s time we focused more the well-being of the Singaporean middle class than that of of the top 10%.
The AFP report also reinforces the argument I outlined earlier about CPF’s inadequacy. We’re no longer in a golden period of prosperity, if there ever was one to begin with.