News

MAS Warns That Prices of Groceries & Electricity Will Continue to Rise

2022-04-29 , 11:25 am

A review by the Monetary Authority of Singapore revealed that prices for fuel, electricity, gas, and non-cooked food will continue to rise.

Here’s what you can expect.

Russo-Ukraine War Driving Price Increases

The Russo-Ukraine war is raising the prices of food across the world.

This is because both countries are major world exporters of grains and edible oils. Since they’re busy being at war and exports from them have dropped, the drop in global supply thus led to steep price increases.

Watch this video to see a cute cat explain this to you:

Reduced supply of fertilisers from Russia and Ukraine has also led to a rise in fertiliser prices. As farmers start to use less fertiliser globally to save costs, this could lead to lower agricultural yield.

Lower agricultural yield, or a decreased supply of food, will thus drive food prices even higher.

Poor Weather Conditions Lead To Rising Food Prices

But it’s not just Russia and Ukraine exporting less. Other major grain-producing regions like China and parts of America have been experiencing poor weather conditions.

This, once again, leads to lower crop yield and drives prices further up. This decrease in grain supply is expected to last till next year.

Additionally, the decrease in grain supply means higher costs for animal feed. This will eventually lead to higher prices of meat and dairy as well, since it costs more to feed these animals.

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Oil and Electricity Prices Rising

Oil prices are rising in Europe due to the Russo-Ukraine war, and this has spilt over to Asian gas prices as well.

Furthermore, some Russian oil has been kept off the international market due to import bans. Major oil traders and firms, to show support for Ukraine, has also stopped importing Russian oil.

Thus, Brent crude oil prices are expected to remain high, as supply continues to be tight and there could be more oil supply disruptions in the future.

For the entirety of 2022, the crude oil prices will average US$105 per barrel. This is a 49% increase from US$71 in 2021.

This increase in global oil prices means that electricity will become more expensive too. While those of us on fixed price plans under the Open Electricity Market are safe (for now), what about when you renew your contracts?

If your contract renewal is coming up, do expect it to be at a much higher rate than your current one.

Rising Core Inflation Means the Cost of Everything Will Increase

As Singapore is an import-reliant country, rising global costs will translate into rising domestic costs very quickly. This is because our imported goods are getting more and more expensive, and our domestic firms won’t be able to absorb the costs forever.

This leads to rising inflation in our country, as the prices of our goods and services increase.

In fact, Singapore’s core inflation, which excludes volatile prices like accommodation and private transport costs, has already hit a decade-high record in March 2022.

A third of the increase in core inflation was brought to us by higher electricity, gas, and non-cooked food prices.

In particular, there were stronger price increases for fish, seafood and meat. The rising costs of animal feed, coupled with labour shortages in Singapore’s key meat import sources like Brazil and Malaysia, led to great price increases for meat.

Additionally, Singapore also experienced higher prices for other retail goods and services. In particular, import costs rose more for travel goods, handbags, clothing accessories, apparel, and photography equipment.

Airline ticket prices rising was also a fifth of the increase in core inflation. However, with COVID-19 testing requirements relaxing in Singapore and many other countries, these prices are expected to fall.

There were also increases in the price of essential services, like public transport fare hikes and the fading of pre-school subsidies.

If you scrolled till the end and need a TLDR: basically, the prices of everything will increase, and the hole in everyone’s wallet will get bigger.