GST hike did not 'turbocharge' inflation, says PM

Inflation was driven mainly by global factors and has eased here and elsewhere, he says

- Goh Yan Han

The GST increase did not lead to a "turbocharging" of inflation, said Prime Minister Lawrence Wong, noting that price increases moderated after the tax rate was raised in 2023 and 2024.

PM Wong was responding to Leader of the Opposition Pritam Singh, who questioned during the Budget debate why the Government had gone ahead to raise the goods and services tax (GST), "thereby turbocharging inflation further".

Inflation was driven primarily by global factors — war, supply chain disruptions and rising energy costs — and has since eased globally and in Singapore, he said on Feb 28.

PM Wong, who is also the Finance Minister, added that Singapore's central bank assessed the GST increase to have a "transitory" impact on inflation. The tax rate was raised from 7 per cent to 9 per cent in two stages, in 2023 and 2024.

Inflation peaked in 2022 at 6.1 per cent, he said. It moderated in 2023 to 4.8 per cent, before coming down further in 2024 to 2.4 per cent.

"Where is the turbocharging?" he said. "Look, I know elections are approaching, but this Chamber is not an election rally. Let's not get carried away by hyperbole and have a debate based on facts."

The fact is that inflation has eased both globally and in Singapore, said PM Wong in his speech to round up the three-day debate on Budget 2025, which saw 57 MPs raise their concerns and suggestions.

He acknowledged that people are still concerned about cost pressures, and that it takes time to adjust to new price realities.

This concern is not unique to Singapore, as it is felt across many other advanced economies where the headline economic indicators are positive but sentiments poor, added PM Wong.