SINGAPORE: Singapore’s overtaking of Covid-battered Hong Kong in the last two editions of the Global Financial Centres Index may have come with some costs: The city-state’s inflation has outpaced its rival’s in nearly every monthly reading over the past two years.
The Asian financial hub’s February consumer price index rose 6.3% from a year earlier, nearly four times the reading of Hong Kong’s 1.7% CPI increase.
Hong Kong’s consumer inflation outpaced Singapore’s for much of the 1980s and 1990s, as the former British colony became one of the world’s leading financial centres. Singapore gained significant ground during the pandemic, though, with Hong Kong maintaining severe Covid curbs for much longer.
Now, Singapore is grappling with higher costs as rents rise — partially as people from Hong Kong and elsewhere consider the city-state as an enticing location — and as energy prices soar.
“From the Singapore side, we’ve seen an influx of folks from China, bidding up housing costs,” said Bloomberg Economist Tamara Henderson.
Hong Kong’s consumer prices will likely remain subdued in 2023, with economists surveyed by Bloomberg expecting annual CPI to rise 2.4% year-on-year. Singapore, though, is expected to see annual consumer inflation increase to 4.7%, or nearly double its rival, driven by higher goods and services tax.
Bloomberg Economist Eric Zhu pointed out that Hong Kong’s gross domestic product has contracted for three of the past four years, adding that tourism visits and retail sales are “still below pre-Covid levels”.
While Hong Kong’s inflation is likely to pick up this year as the recovery in demand accelerates, Zhu said CPI would at most touch 3% in the final quarter of the year.