Is Singapore stuck in a deflationary spiral?

Inflation has been negative for 15 months.

Consumer prices in Singapore have been in the red for 15 consecutive months, marking the city-state’s longest deflationary streak in almost four decades.

However, analysts reiterate that Singapore is not in deflation, as the negative print was mainly driven by the usual suspects of cheap oil prices, low private transport costs and weak accommodation costs.

“We like to reiterate that Singapore is not in the middle of the much-dreaded “deflationary spiral” even as MAS expects deeper headline price declines in 2016 which will most certainly add to recent calls for the MAS to ease further in the upcoming April policy meeting,” said Alvin Liew, Senior Economist at UOB.

Liew added that despite persistently negative inflation, Singapore is not expected to sink into recession this year.

“We continue to expect Singapore to clock in growth this year. It may turn out to be a bit better than 2015’s 2% or even slightly slower,” Liew noted.

Selena Ling, economist at OCBC, noted that their headline inflation forecast of -0.4% remains sufficient despite policymakers’ decision to trim official forecasts.

"There is no need to tweak them at this juncture as they sufficiently account for the deflationary effects of crude oil prices and domestic asset prices in our view. Moreover, the official rhetoric is not overtly dovish, especially on the core inflation front, so it would be premature to extrapolate this to the April monetary policy meeting ceteris paribus," Ling said.