SINGAPORE — The opening up of the retail electricity market will dampen inflation this year as it has substantially lowered electricity prices, Singapore’s central bank said.

As a result, the Monetary Authority Singapore (MAS) has revised its full-year inflation forecast for 2019 downwards to between 1 and 2 per cent, from 1.5 to 2.5 per cent previously.

Lower global oil prices will also add to the weaker inflation, the MAS added in its latest macroeconomic review on Friday (April 26).

CHEAPER UTILITIES, WEAKER INFLATION

The MAS said that the nationwide roll-out of the Open Electricity Market (OEM) last November, which allows consumers to choose from 13 energy retailers, has substantially lowered electricity prices.

In February, the Energy Market Authority indicated that a sizeable proportion of consumers had taken up plans offered by electricity retailers.

Nearly one-fifth of consumers in areas such as Ang Mo Kio, Bishan, Hougang and Punggol have made the switch to a different electricity retailer just one month after the OEM initiative kicked off in these neighbourhoods.

The MAS noted that consumers who switched enjoyed electricity charges that were about 20 to 30 per cent lower than the regulated tariff.

This, coupled with the decline in oil prices in the fourth quarter of last year, reduced electricity inflation in the first quarter of this year.

Furthermore, the proportion of households switching to price plans offered by electricity retailers is set to rise further in the months ahead, with the launch of the final phase of the OEM in May.

The last residential neighbourhoods to choose will be those with postal codes that begin from 01 to 33. These are areas such as Clementi and Queenstown. They can do so from May 1.

In addition, electricity retailers are also expected to keep their rates substantially lower than the regulated tariff given the intense competition, the MAS said.

OIL PRICES

Another reason for the lower inflation forecast is due to lower oil prices. 

Although oil prices have recovered since last December — rising from US$54 then to US$74 towards the end of this month — they remain volatile amid ongoing uncertainty of the macroeconomic environment and the impact of geopolitical events on oil production, the MAS said.

Against this backdrop, the MAS said that prices are expected to average around US$67 this year, lower than the projection of US$78 in its previous economic review published in October last year.