SINGAPORE — Labour demand is expected to improve in the near term, but it will take time for unemployed individuals to be “absorbed” back into the workforce, said the Monetary Authority of Singapore (MAS) in its Macroeconomic Review on Friday (Oct 27).

Wage pressures are unlikely to build up rapidly, the central bank added.

“Overall labour demand is expected to improve in the near term, supported by hiring in the modern services and community, social & personal (CSP) services, as well as for the year-end festivities,” said MAS.

The labour market may have reached its “turning point” with overall retrenchments moderating to 7,640 in the first half of this year, compared to 9,660 in the previous six months. The overall jobs vacancy rate also edged up over the same period for the first time since the first half of 2014.

Nevertheless, the previously accumulated slack in the labour market will “take time” to be absorbed, and the unemployment rate will likely remain close to current levels in the near term, the authority said.

“Wage pressures are thus unlikely to build up rapidly, even as the improvement in productivity growth continues into next year. This, together with subdued non-labour costs, such as commercial and retail rentals, will continue to restrain domestic cost pressures,” it noted.

Resident wage growth slowed to 2.5 per cent year-on-year in the first six months of this year, well below the 10-year historical average of 3.7 per cent. The rate was 3.4 per cent for the second half of last year.

Meanwhile, overall labour productivity growth hit 2.8 per cent for the first half of this year compared to a year ago, up from 1.3 per cent for the previous six months, on the back of a surge in electronics output.

On the external front, imported inflation is likely to rise mildly, as ample supply in key commodity markets tempers price pressures from increased demand, said MAS. Global oil prices are expected to increase only slightly next year, compared to this year, as oil markets gradually rebalance, it said.

MAS projected core inflation to come in at around 1.5 per cent this year and average 1 to 2 per cent next year. Headline inflation is expected to be around 0.5 per cent this year, and stay within the range of 0 to 1 per cent in 2018.