Too high inflation and great uncertainty about developments We have a year behind us in which inflation rose sharply around the world and central banks raised policy rates at a rapid pace. At the beginning of 2022, inflation was around 4 per cent in Sweden. The Riksbank and most forecasters assessed that inflation would fall during the year. As we know, it continued to rise instead. One reason was the rapid economic recovery from the coronavirus crisis, which pushed up prices on commodities, inputs and transport. Household demand was high, while it was difficult for businesses to adjust and increase production quickly enough. As a result, inflation received an unexpected boost when economies opened up. Another important reason was Russia's invasion of Ukraine, which drove up the prices of energy and grain, as well as other agricultural products. In addition, the high energy prices had indirect effects on inflation via, for instance, rising prices for transports and other input goods for companies. In the context of high demand following the pandemic, firms found it easier to pass on their increased costs to consumer prices than might have been expected from previous experience. One year later, at the beginning of 2023, we thus had both far too high inflation and the lesson from last year that it is very difficult to know how inflation will develop. There are many indications that inflation in Sweden, as well as abroad, will fall back in 2023.
Conclusion Singapore has not shied away from tough measures to remake our economy and maximise our chances in a difficult environment. These measures will enhance our competitiveness, strengthen our companies and consolidate our social cohesion. They will make our economy more flexible, resilient and able to adjust quickly to changing circumstances, and so help it to remain ahead in the race of nations. Although the media impression is that Southeast Asia has stagnated since the Asian Crisis, the reality is less gloomy. ASEAN economies have made progress in picking up the pieces and pursuing domestic reform and restructuring, albeit some more successfully than others. Between 1999-2001, ASEAN economies as a whole grew by about 4% per annum. Last year, an export-led slowdown on the back of a global electronics slump broke the recovery trend. But ASEAN economies weathered the downturn fairly well, with most still managing positive GDP growth. Most are running current account surpluses, in contrast to the large deficits that prevailed in 1997. From a macroeconomic standpoint, the countries have held up well and even shown a certain resilience. Reflecting this, ASEAN stockmarkets have generally performed better than their counterparts in the rest of the world thus far this year. Part of Southeast Asia’s negative image is attributable to political and security concerns, which are indeed real. A week or so after the Bali attack, these worries naturally loom large. Many observers, seized by the mood of the moment, are now forecasting the worst for the region.