If you’ve been anywhere on the Internet recently, you would have heard of the war that is set to occur between Russia and Ukraine. But if you aren’t associated with the news, you can get started here.
While the two countries are over 8,000 kilometres from our tiny red dot, there will no doubt be an impact on us should the war occur. Here’s how.
Higher Food Inflation
Ukraine is the world’s third-largest exporter of corn and the fourth-largest exporter of wheat, while Russia is the world’s top wheat importer.
This means if food supplies coming out of the region are disrupted, there will be a lack of supply to meet the global demand for the staples. This eventually leads to a spike in prices of these goods.
This is concerning as food inflation is already on the rise and world food prices have jumped 28% in 2021 to their highest level in a decade.
Food inflation was one of the main drivers of higher consumer prices in Singapore in January, rising 2.6% for both non-cooked food and prepared meals.
So if you realised your local hawker centre food and supermarket groceries have been seeing a few cents’ increase, it would most likely be due to this.
Increase in Electricity Costs
High energy prices have been plaguing global markets, with gas reaching record prices in recent months.
With Europe heavily reliant on Russian gas transiting through Ukraine as seen in how Russia provides Europe with around 40 per cent of its natural gas supply, the energy markets may also be hit.
Singapore largely relies on natural gas for electricity generation, and any impact on global gas prices could mean higher electricity prices for the Republic down the road.
Electricity and gas inflation in Singapore hit 17.2% in January due to a steeper increase in electricity and gas tariffs.
Essentially, prepare to see higher utility bills.
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Higher Pump Prices
Russia is the second-largest oil exporter after Saudi Arabia, shipping about five million barrels of crude oil per day. And…you already know how this goes.
If the conflict escalates to the point that oil cannot be supplied from Russia, it will spiral into an energy crisis, and push oil and gas prices higher.
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In recent weeks, pump prices have been on the rise in Singapore, driven by higher crude oil and product costs.
For example, at your local petrol stations, you might have noticed the price of 95-octane fuel has gone up from around $2.65 a litre in mid-January to around $2.80 a litre as at mid-February.
With the price of Brent crude oil reaching a multi-year high and the possibility of further increases should tensions worsen, this could mean higher diesel and petrol costs for motorists here.
Supply Chain Disruption and Further Inflation Risks
Global supply chains, already battered by COVID-19-related challenges, could be further affected by the Russia-Ukraine tension.
Singapore’s Ministry of Trade and Industry and Monetary Authority of Singapore, in a joint release of consumer price developments for January 2022, noted that ongoing external supply constraints should ease in the second half of the year, leading to some moderation in imported inflation.
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However, there remain upside risks to inflation due to pandemic-related and geopolitical shocks that could further disrupt global supply chains.
Escalating tensions and sanctions could also result in energy supply disruptions and potentially hamper the already burdened supply chains further, contributing to further inflation risks.
TLDR: Russia and Ukraine are big-shot exporters, their taiji is also our taiji and you might see prices in Singapore rise very soon. So I guess we can all heave a big sigh of relief that GST is not set to rise this year.
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Featured Image: Shutterstock / Review News
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