Impact of Shipping Disruptions in the Red Sea on Singapore's Economy and Consumer Prices
Ministry of Trade and IndustrySpeakers
Summary
This question concerns the economic impact of Red Sea shipping disruptions, with Mr Darryl David and Mr Saktiandi Supaat inquiring about mitigation strategies and inflation risks. Minister for Trade and Industry Gan Kim Yong stated that re-routing vessels via the Cape of Good Hope has increased transit times and freight costs for imports such as chemicals and machinery. He noted that current GDP growth projections of 1% to 3% and inflation forecasts of 2.5% to 3.5% already account for these disruptions. Minister for Trade and Industry Gan Kim Yong highlighted that while effects are currently manageable, an escalation in conflict would pose significant risks to growth and prices. The Government continues to monitor the situation closely and engage with the business community to address potential challenges to the economy.
Transcript
39 Mr Darryl David asked the Minister for Trade and Industry (a) how will adverse impacts on the international shipping industry due to tensions in the Red Sea between the United States and the Houthis affect the Singapore economy; and (b) what steps will the Government take to mitigate impacts on the Singapore economy, if any.
40 Mr Saktiandi Supaat asked the Minister for Trade and Industry (a) what proportion of Singapore’s imports are shipped via the Red Sea; (b) whether there is any concentration of goods that are shipped via the Red Sea; and (c) whether the recent Red Sea shipping disruptions has impacted the short-term and medium-term inflation outlook for the Singapore economy and, if so, how.
Mr Gan Kim Yong: In response to attacks on vessels and tankers in the Red Sea, major shipping lines have re-routed long-haul trans-Pacific and Asia-Europe services via the Cape of Good Hope, which adds 10 to 15 days of transit. This has led to some delays in Singapore’s imports from Europe that are typically transported via the Red Sea, such as petrochemicals, specialty chemicals and machinery. The disruptions in the Red Sea have also raised sea freight charges. Businesses have provided feedback that these repercussions are manageable thus far, as the proportion of goods that are shipped from Europe by sea is small compared to Singapore’s total global imports.
The Ministry of Trade and Industry has projected that Singapore’s economy will grow by 1% to 3% this year. The Monetary Authority of Singapore' Core Inflation is expected to moderate to 2.5% to 3.5%, from 4.2% last year, given that global energy and food commodity prices, as well as the costs of most other imported goods, have fallen. These forecasts have accounted for the current Red Sea situation. Should the conflict escalate further, we expect additional downside risks to gross domestic product (GDP) growth and upside risks to inflation. We will continue to monitor developments closely including engaging with our business community.