Jul 24, 2013

    Singapore inflation outlook trimmed

    SINGAPORE'S central bank yesterday cut its inflation outlook for the year, but was worried about household debt levels as interest rates look set to rise.

    The Monetary Authority of Singapore (MAS) lowered its inflation forecast for this year to 2-3 per cent, from 3-4 per cent earlier, citing the sharp fall in car prices earlier this year and a slower rise in accommodation costs, Reuters reported.

    Overall inflation here rose 1.8 per cent last month, compared to that a year ago, data released yesterday by the Singapore Department of Statistics showed.

    This was slightly higher than the 1.6 per cent in May. Still, last month's inflation stayed near three-year lows, The Straits Times said.

    MAS warned that core inflation - which excludes car and accommodation prices - could rise "moderately" to 2 per cent or slightly higher in the latter half of this year, due to continuing tightness in the labour market.

    Headline inflation averaged 2.8 per cent for the first half of the year, while that for the whole of last year was 4.6 per cent.

    The central bank was concerned about rising household debt in Singapore, saying that an estimated 5-10 per cent of borrowers had "probably overleveraged on their property purchases", based on their total debt-service-payment ratio of more than 60 per cent of monthly income.

    It said that if mortgage rates rose by 3 percentage points, the proportion of borrowers at risk could reach 10-15 per cent.