Essay on The Major Causes of Inflation In Singapore Economics

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It is a pretty much true fact that everyone deals with money about every day but do everyone understands about it?

No one focuses on how money can change over time and in turn create a situation of inflation.

What is inflation?

Inflation is a quantitative proportion of the rate at which the normal cost level of a bin of chosen merchandise and wares in an economy increments over some timeframe. It is the ascent in the general degree of costs where a unit of cash successfully purchases short of what it did in earlier periods. Inflation shows a lessening in the buying intensity of a country’s money, as expressed as percentage frequently.

Inflation can be understood in the contrast of deflation which happens when costs rather decay.

These are some important points about inflation: –

• Inflation is the rate at which the general degree of costs for supplies and services is rising and, subsequently, the buying intensity of money is falling.
• Inflation is characterized into three kinds: Demand-Pull inflation, Cost-Push inflation, and Built-In inflation.
• The inflation indexes which are most often utilized are Consumer Price Index (CPI) and the Wholesale Price Index (WPI).
• Inflation can be seen emphatically or adversely relying upon the individual perspective and pace of progress.
• Those with substantial resources, similar to a property or loaded items, may long for some inflation as that raises the estimation of their benefits.
• Individuals holding money dislike inflation, as it disintegrates the estimation of their money property.
• Preferably, an ideal degree of expansion is required to elevate spending to a limited degree rather saving, along with nourishing monetary development (economic growth).

Inflation Rate in Singapore

The average rate of inflation in Singapore 2018 was added up to about 0.44 percent contrasted with the earlier year, and it appeared to recoup from sliding into the red all through 2015 and 2016. For 2021, Singapore’s inflation is presumed to level off at around 0.5 percent.

As sensational as it looks, there was no clear idea behind Singapore’s inflation rate to dip under zero in 2015 and 2016. A droop in financial development and oil costs, along with a low consumer price index (CPI) was in all probably answerable for inflation enduring a shot in those years. Singapore has since recouped and proceeds with its example of overcoming adversity as one of the foremost economies in the East.

The Major Causes of Inflation In Singapore Economics

In the hard times, there arises a query that “What Causes Inflation?“.

At present when global factors hamper or change the demand that leads to the changes in the supply pattern, price, and production. There are many other factors in the economy which are impacted by the global factors and the policies of the country itself. Such factors are employment level, wages change, unutilized resources, etc. Inflation is the rise in the prices with the decrement in the currency value.

It is calculated by an average weighted price change in terms of the base year. There are some products which are taken into account with respect to the price change in the calculation of inflation. Mostly these products are consumables so the price index which calculates the inflation based on this is called “Consumer Price Index”

Inflation affects the redistribution of the resources in the country. It also changes the production pattern. For a limit, inflation is considered good but beyond the limit, it is actually harmful to the economy. Inflation is of two types

No. 1 – Demand-Pull inflation

Demand-pull inflation means the rise in the prices due to the increase in demand. Where there is high demand and supply is low the price of the products tends to rise, it is called demand-pull inflation.

It can be due to the change of the preferences of the consumers, demographic changes or due to the show off (keep up with the Johannes’s) effect.

No. 2 – Cost-Push Inflation

There is a radical increment in the costs of firms which the businesses pass it on to the consumers.

Cost-Push inflation can be caused due to various factors: –

• Profit push inflation
• Declining productivity
• Rise in the cost due to expensive raw materials, import goods, technology, etc.
• The rise in the prices offered by suppliers, emergency wars or any other externalities.
• Rise in the wages of the laborers due to union or other factors.
• The rise in taxes by the government, duty prices, etc.

Inflation can be of various types based on its percentage increase. As it is the sustained rise in the overall prices of goods and services so its rate can vary and according to that we can say that inflation is healthy or not.

No. 3 – Stagflation: In this type of inflation there is a lot of unemployment in the market and there is also stagnation in the economic growth

No. 4 – Hyperinflation: This is also called as running inflation. It is very harmful to the growth of the economy and it can lead to the collapse of the whole monetary system of the country.

Causes of Inflation in Singapore

Singapore was a British colony in 1819 it got its freedom in 1963 and became one of the growing and prosperous economies. Its GDP rose approx. same as the western counterparts. At present, it is a highly developed and open market economy. Its trade turnover is very high.

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The international trade of Singapore is amongst the highest and the dependence on exports is clearly visible in the economy. However, the global recession led to a decrease in the demands for high technological products. As well as the disease based on respiratory uneasiness named SARS broke out and impacted the trade and tourist income of the country.

However, Singapore used the fiscal stimulus to initiate the GDP growth of the economy. The government took a lot of initiatives to curb the effect of global ups and downs and attracted a lot of foreign investments in the country. But no initiative could curb the inflation rate and slowly it reached a higher level.

The specific reasons for the increase in inflation are:

• The high growth of the population in Singapore
• The growth of the economy and the growth of the GDP
• Hike in taxation
• Increase in the prices of transportations
• Immigration is open-door immigration.
• Consumer prices increased over time.

Methods to Lessen the Inflation in Singapore

In the hustle and bustle, it is an important issue to take care of that “how to curb the inflation” or “how Singapore control inflation”.

There are many ways to curb inflation, one is through the monetary side another is from the fiscal policy side. The main motto of the diminishing the inflation is to set a Singapore inflation target and bring the factor to a normal inflation rate.

• On the monetary side, the rate of interest can increase so the pull of the money back to the bank can lead to the decrement in the inflation.
• People can be attracted to save more money and the disposable income will decrease.
• While fiscal policies like a decrease in taxation rates, deregulation, etc can help in decreasing the inflation rate.
• There are supply-side initiatives and policies which aim to raise the long-run competitiveness along with productivity.
• Exchange rate policies are the government policies which focuses on the exchange rate of its currency which in turn also change the inflation rate.

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Conclusion

Overall, considering all the factors, Singapore’s economy has been doing quite well. However, the very recent rise in the inflation level was notable. Regardless of all the factors and issues, the government could handle this inflation by various policies like price control policies, rationalization of the local industries and rational wages which will in turn also ease the housing inflation Singapore. Ultimately, Singapore’s economy will be relieved from the inflationary pressure.