Big Read in Brief: Families and Businesses Struggle with Rising Costs Ahead of Imminent Increase in GST

Big Read in Brief: Families and Businesses Struggle with Rising Costs Ahead of Imminent Increase in GST

SINGAPORE – Before the COVID-19 pandemic about two years ago, housewife Surya Saini was spending around S$400 per month on groceries and other basic necessities.

But as of December last year, her monthly spending has risen to over S$500 on the same list of items.

“I always go to the same stores, same market stalls. There seems to be a 50 to 80 cent increase on most things like shampoo and detergent. Prices have gone up a lot,” said MDM Surya, 47.

Mdm Suria said she noticed that a carton of 30 eggs, which cost S$3, went up to S$5. The price of a packet of instant noodles increased from 1.80 Singapore dollars to 2.20 Singapore dollars.

Worldwide, inflation is set to be a major challenge this year, with prices rising on multiple fronts. Border restrictions and supply chain disruptions – as a result of measures to contain the spread of Covid-19 – have also led to higher manpower costs and freight charges for companies.

In Singapore, families face higher prices on a range of goods and services, including food, public transportation and electricity.

The Monetary Authority of Singapore (MAS) highlighted rising inflationary pressures and moved to tighten monetary policy in response.

The situation here has been exacerbated by the recent bout of flooding in Malaysia, which has led to higher import costs for goods that Singapore gets via the highway.

Prices are expected to rise further this year, with the impending increase in the Goods and Services Tax (GST).

In his New Year’s message, Prime Minister Lee Hsien Loong said the government should “begin to move” on the planned increase in the GST from 7 per cent to 9 per cent.

And the US State Department said in its October Macroeconomic Review that public transportation prices may rise again and health care subsidies may be phased out this year as well.

MAS expects overall inflation for 2022 to be between 1.5 and 2.5 percent, up from about 2 percent in 2021. Core inflation, which excludes private transportation and accommodation costs, is expected to rise between 1 and 2 percent thereafter. General – Above the upper end of the 0 to 1 percent forecast range that MAS expects inflation to reach in 2021.

With multiple factors converging to drive prices higher, Celina Ling, head of research and strategy at OCBC, said the current situation is akin to an “inflation storm.”

“The question is whether some industries and companies are in a position to pass on the higher costs, not only from higher GST, but also from accumulating higher operating costs,” Ling said.

Corporate “snowy” profit margins

Several business owners told TODAY that they felt rising cost pressures in several areas — workforce, logistics, raw materials, and electricity.

With many retailers forced to go online as a result of Covid-19, digital marketing costs have also skyrocketed.

Bernard Tai, managing director of Jinjja Chicken, said operating costs for the Korean fried chicken business increased by 20-30 percent last year, compared to 2020.

The price of one can of cooking oil has gone up 40 per cent and labor costs have gone up as border restrictions make it difficult for him to hire workers from Malaysia.

Another retailer, Kason Lim, director of toy distribution company Being Kids, said his business costs jumped by a similar amount from 20 to 30 percent due to rising shipping costs and a shortage of manpower.

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