Russia-Ukraine War Will Further Drive Up Costs for Singaporeans Amid High Inflation Environment
Unless you’ve been living under a rock, you would have heard of Putin’s all-out invasion of Ukraine, which started on the morning of 24th Feb 2022 SGT.
The war overseas may be 8,618 km away from us, but its effect on Singapore and the world will be felt in the weeks and months to come.
Amid a near 9-year high headline inflation rate of 4.0%, here’s how everyday Singaporeans like you and me will be further affected in the future.
TL;DR: Russia-Ukraine War Effects on Everyday Singaporeans
In essence, expect the prices of oil, gas, electricity and food items like wheat and corn to rise as both Ukraine and Russia are major exporters of these products.
Oil prices have already surged past US$100 per barrel following Putin’s invasion of Ukraine, the highest since 2014.
In the longer term, the global inflation rate will be set to rise even more due to supply chain disruption.
Increase in Electricity Costs
Electricity costs have already been increasing in recent months and the recent invasion of Ukraine will put further upward pressure on Singaporean electricity prices.
In Europe, gas prices have surged and the international benchmark, Brent crude futures, surpassed US$100 per barrel for the first time since 2014. For context, Europe receives about 40% of its natural gas supply from Russia, which explains the rapid increase in gas prices following the invasion.
Back home, Singapore relies heavily on natural gas for energy generation; over 95% of our energy is derived from natural gas.
While we have explored other means for energy generation and diversified our natural gas sources, the increase in global gas prices will inevitably reach our shores.
So, be financially prepared for a further increase in utility bills down the road.
Higher Pump Prices
Like energy prices, petrol prices have also been on the rise and is set to increase more with Putin’s invasion.
Second only to Saudi Arabia, Russia accounts for roughly five million barrels of oil a day. As the war continues, or if Putin decides to stop exporting oil to the rest of us, we will be looking at a global energy crisis that will cause prices to skyrocket.
In other words, owning a car in Singapore will become increasingly costly when petrol and diesel prices increase locally.
Higher Food Expenses
If you’re a corn or bread-lover, we have some bad news for you…
Ukraine is the third-largest exporter of corn and the fourth-largest exporter of wheat.
As the war rages on, the supply of food items coming out of the region will undoubtedly be affected, leading to a lack of supply to meet the demand of these food staples.
Again, economics tells us prices of these food staples will go up, amid an already high inflation environment.
In Singapore, food inflation is already a concern for us with a 2.6% increase based on the January 2022 Consumer Price Index.
Coupled with the effects of the war, don’t be surprised to see the cost of bread and other food staples go up soon.
Added Inflationary Pressure
In the wake of the pandemic, global supply chains have already been hammered, and Putin’s war on Ukrainian soil will break supply chains further.
When we look towards the long-term, global supply chain disruptions will translate into added inflationary pressure, especially in Southeast Asia with rising demand.
What’s Next for Singaporeans?
Thankfully, Singapore has been diversifying in many areas and cushioning us from the effects of inflation and rising costs. Singapore’s food security is also strong so you don’t need to start panic buying bread or other wheat-based products.
Be that as it may, it will be good for us to brace for the eventual impact this war will bring.
For a start, expect higher utility bills, food expenditure and pump prices if your family owns a car.
If you haven’t already planned out your budget and taken into consideration rising costs of living, you can get started with our budgeting guides such as the Seedly Money Framework.
It is also good to start cutting expenditure where possible and take advantage of any cashback, rewards or rebate programmes.
Last but not least, you can learn some saving hacks such as how to save on groceries or saving on food expenses.
With all that said, the impacts that we will feel here is nothing compared to the innocent lives lost in this senseless invasion of Ukraine. Our hearts go out to those who are suffering and we hope that the war will come to an end.