Written reply to PQ on impact of GST increase on core inflation and mitigating measures for price stability

Question

Mr Liang Eng Hwa: To ask the Minister for Trade and Industry (a) whether the latest increase in GST rate is expected to affect core inflation; (b) what are the other key drivers that could push up inflation this year; and (c) what mitigating measures will be used to manage price stability.

Written Answer by Minister for Trade and Industry Gan Kim Yong

1. MAS Core Inflation is projected to average 2.5% to 3.5% in 2024, compared to 4.2% in 2023. The GST rate increase is estimated to contribute slightly less than 1%-point to core inflation which has been taken into account in the projection. Other contributors to core inflation include higher electricity and gas tariffs in the first quarter of the year arising from the increase in oil prices towards the end of 2023, as well as higher water prices from April due to increases in production costs, as announced earlier.

2. MAS has announced that it will keep the exchange rate policy band on a steady appreciation path. This will continue to dampen imported inflation and support medium-term price stability. The Government will continue to monitor inflation trends and help households and businesses adjust where necessary.