Impact of Shipping Disruptions in the Red Sea on Singapore's Economy and Consumer Prices

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.

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.