The Week Ahead: Budget 2023, Singapore inflation

Budget day

FOCUS will be on Budget 2023, which will be tabled on Friday, while corporate earnings are in their final lap.

According to Prime Minister Datuk Seri Anwar Ibrahim, the budget will drive reforms in the country’s economic recovery, boost investment and improve public infrastructure.

The government is also seeking to reduce its debts without affecting its development programmes.

The Statistics Department is expected to release data on inflation and external trade while Bank Negara is set to announce its international reserves.

Singapore inflation

BLOOMBERG estimates Singapore’s headline inflation at 7.1% year-on-year (y-o-y) while UOB expects it to grow 7.4% y-o-y.

Singapore’s inflation rose 5.1% in December 2022.

ING sees headline inflation tick lower, but core inflation will likely remain elevated at 5.2% y-o-y as the latest increase in the goods and services tax kicks in.

China LPR IT is unanimous among the 11 economists polled by Bloomberg that the one-year loan prime rate (LPR) and five-year LPR fixings will be unchanged at 3.65% and 4.3% respectively.

UOB Global Economics and Markets Research maintains its forecast for the one-year LPR to fall to 3.55% and five-year LPR to 4.2% by the end of the first quarter, most likely after the National People’s Congress.

ING predicts that the chance for a change in the LPR is small given that the economy is recovering and that the People’s Bank of China had left the one-year medium lending facility rate unchanged.

Moreover, ING says banks have been told by the government to offer lower interest rates on mortgages to provide support to the economy.

This will result in banks not having enough room to squeeze net interest margins.