Stagflation here to say: UBS

In Economy on 14/01/2013 at 5:26 am

Well OK, “mini stagflation”, though I’m sure in other countries, the word “mini” would be omitted. But there is the ISA here, while cynical me knows that all investment banks are hungry for biz from Temasek and GIC.

Singapore is experiencing “mini stagflation”, as its inflation is likely to remain high for structural reasons even as growth stays weak this year, said Kelvin Tay, UBS regional chief investment officer, Southern Asia Pacific, at a seminar on Friday.

The restructuring of the economy, shifting from indiscriminate growth to the quality of growth, means lower growth and high inflation. It’s a structural problem, “Singapore is suffering more from structural inflation.” He was speaking at a business outlook forum organised by the Singapore Chinese Chamber of Commerce and Industry and SPH.

Even though the headline inflation rate may subside, as it did in November on high-base effects (this is a highly technical reason, that doesn’t have real world effects on us consumers), higher labour costs due to tighter foreign labour policies and efforts to boost low-wage workers’ salaries will continue to push prices up. Profit margins will also be squeezed further as businesses (esp SMEs) are forced to invest to raise their productivity.

And he thinks cost increases are likely to be be passed on: not shumething that is likely to please consumers, who are suffering from higher COEs, and property prices, and real wages that are stagnating. PAP govt will not be too happy too with stagflation, as grumbles grow during NatCon.

  1. Taiwan Semiconductor Manufacturing Company Limited (TSMC)
    Dr. Morris Chang – the founding Chairman of TSMC
    The new economic model of Taiwan’s economic development in two parts
    1/2 小英教育基金會「台灣經濟發展新模式」講座-張忠謀

    Dr Morris Chang made the following points:
    (1)21st century moves from Capital industry – knowledge Industry (Innovation & Value creation),there are critical factors will determine economic development during 21st century.-Capital,Labour Force,Productivity & Innovation.
    (2)Call on government to reduce GINI coefficient ,Higher taxation on top earners, Rich people are paying too little tax , even Taiwan government tax high income earners atthe highest tax rate of 40% but the richest tycoons only pay 7 to 8% income tax,
    Government should study the income of Top 2% vs Middle Class 20%,to tighten the current loopholes on legalised tax avoidance.
    (3)”Industry Policy” should focus on creating an enviroment to encourage innovations,openness and fair competition,but not on picking winners or rescuing losers.
    Businesss should put more emphasis on innovations and value creations-more emphasis on innovators and added value creators.and less emphsis on capital.
    (4)Educational policy should focus on
    a.Training people to perform a useful economic rule in society
    b.Innovators and value creators
    c.Leaders of society
    (5)The importance of an “OPEN SOCIETY” for the country to move forward.
    Singapore is staying put or moving backwards,what a pity.

  2. The slides are in English
    2/2 小英教育基金會「台灣經濟發展新模式」講座-張忠謀

  3. This discussion is relevant to Singapore,lessons from an innovator and value creator of a liberal democracy.

  4. Final,very relevant to Singapore which is facing a by-election to tell the government what to do


  5. Not sure how the headline inflation went down in Nov. A whole bunch of medical fees and medical items rose in price in Oct. So did quite a few other things. Like food. Now petrol is up in price. Deliveries to anyone, anywhere, or anything, will be UP.

    Yes, I know I will hardly feel this 4, 5% inflation. You see I’m busy handling 30%+ REAL inflation.

    As for this UBS guy expecting higher business costs to be passed on. Isn’t this a given? Did he Really expect them not to be? The fact that he’s stating the utter obvious means he’s probly an ex-govt man….

    Wondering if the train and bus system will be able to cope with the Thousands more passengers who will need to use the services when the COEs on their cars run out and they decide they cant afford another car.

    Thank you PAP for your bringing in 2 million foreigners and thus making it near impossible to own a car, travel with a vague illusion of comfort, destroying old bldgs and landmarks for roads, and raising the pollution levels. And all that is just in transportation. Well done!!

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