SINGAPORE (Aug 20): Singapore is going ahead with the planned hike of the goods and services tax (GST) from 8% to 9%, with effect from Jan 1 next year.

The government is considering a bigger “Assurance Package”, in a mix of vouchers and other subsidies, to help people deal with the higher cost of living as a result of the higher consumption tax, said Prime Minister Lee Hsien Loong.

Deputy Prime Minister Lawrence Wong, who is also the Finance Minister, has been promised to “study it carefully”.

“Let’s wait -- and of course, we hope for good news,” says Lee, at the National Day Rally on Aug 20.

Singapore is facing an unfamiliar period of inflation, as its open economy cannot stand in isolation versus the same trend seen across both developed and emerging economies alike.

MAS’ survey of professional forecasters released in June showed that the median forecasts of consumer price index (CPI) All Items inflation for 2023 was 5%, and the MAS Core Inflation was 4.1%. This is in contrast to the figures of 3% and 4.1% for 2024, respectively.

The government, via the Monetary Authority of Singapore, has been trying to cope with the inflationary pressures by strengthening the Singdollar constantly so that imports can be cheaper. By doing so, the spending helped lead to a loss of $30.8 billion for the FY ended March 31.

The other way to cope with higher costs of daily necessities is via a series of subsidies and rebates of utilities bills.

“However, we must understand the Government cannot give out subsidies infinitely,” warns Lee.

“The long-term solution is to make ourselves more productive, transform our businesses, and grow our economy. Then our real incomes can rise and we can all be better off,” he adds.