Recently, there has been much news about Singapore experiencing a decade high inflation rate, and thus greater cost of living. While inflation is a common occurrence, and in fact, a mild inflation is encouraged for simulating economic growth, high inflation has the ability to greatly increase business cost and cost of living. Thus, governments around the world place great emphasis on ensuring that inflation in their country is controlled.

Singapore in 2008 is experiencing a higher than usual inflation rate. Singapore’s inflation rates for the past few months can be seen in the article from The Straits Times below. For the past 10 years, Singapore’s inflation rate has been below 2%. This year, however, has seen it hit above 5% and the MAS forecast for this year is between 6-7%. This is three to four times higher than what we have experienced in the last 10 years.

There are several consequences that will result from a high inflation rate. Firstly, and the most noticeable impact is that the cost of living has increased. Food, fuel and even energy cost has increased in the last few months. This has increased the burden on families with low to middle income. Almost every Singaporean is feeling the effect of the high inflation. Secondly, business cost will increase. This has the potential to reduce Singapore’s competitiveness globally and also cause a slowdown in economic growth as businesses struggle to cope with the rising cost. Thirdly, the high inflation has greatly reduced the time value of money. With interest rate of Singapore being much lower than the present inflation rate, money saved in the bank today will be worth less in the future as the increase in money will not be able to match the increase in cost.

Thus it is wise for businesses, at this present moment, to manage their cost carefully. With the inflation for this year unlikely to fall anytime soon, it is best for businesses to brace themselves for the rising cost and to utilize waste minimization and creative solutions to reduce cost. Businesses should also seek other avenues to invest their money in. Saving money in the banks with interest rates lower than inflation rates will result in money value lost. Thus it is only wise to find investments that can match the inflation rate, so that the value of money will be retained.

At this moment, companies must be ready to face the high inflation rate head on for this year and maybe even next year.