Inflation will become 'very serious problem' for the world if measures are not taken: PM Lee
Prime Minister Lee Hsien Loong speaks during an interview in Washington on May 13, 2022. (Photo: Ministry of Communications and Information)

SINGAPORE—  Inflation will become a very serious problem for the world if measures are not taken to address it, Prime Minister Lee Hsien Loong said in an interview with Nikkei Asia on Friday (May 20).

Highlighting the challenges of tackling inflation, Mr Lee said: “The difficulty is that now that inflation is quite high, you need quite drastic measures in order to bring it back down and prevent inflationary expectations from taking root.

“It is very difficult to do that and have a soft landing. There is a considerable risk of doing what you need to do but as a result provoking a recession.”

He added: “It has happened repeatedly in the 60s, 70s, 80s, 90s. That is a risk which we have to anticipate and watch out for. You will have to take that risk because if you do not act against inflation, that will become a very serious problem for the world.”

Inflation in many countries has soared to multi-year highs, driven by a rebound in economic activity and a further supply chain disruptions.

In the United Kingdom, for instance, figures released on Wednesday showed that prices rose at their fastest rate in 40 years. Annual inflation jumped to 9 per cent in April, up from 7 per cent in March.

Japan’s core consumer prices posted their biggest jump in seven years in April, while Singapore’s core inflation rose to a 10-year high of 2.9 per cent year-on-year in March on higher food and services prices.

Mr Lee noted that the global economy has recovered from COVID-19 faster than expected, helped by stimulus measures.

“However, the stimulus measures continued to be applied very generously, for political reasons, even as the economy was already visibly recovering in the US, and also in Europe. Therefore (this) has contributed to a spike in inflation even before Ukraine,” he said, noting that the war has made it worse as it has disrupted energy and food supplies.

“A year ago, the central banks were quite relaxed about the prospects of inflation being kept under control. In fact, they worried about deflation and they wanted to bring inflation up to a certain level, for example 2 per cent on average,” the Prime Minister added.

“I think they were too complacent even then. But now it is quite clear that they have to change their stance and I believe that they are doing so.”


When asked about Russia’s invasion of Ukraine and its impact on China’s actions in the Asia Pacific region, including the South China Sea and the Taiwan Straits, Mr Lee said the conflict weakens the global order.

“And that worries a lot of countries in this region,” he added.

“Therefore, the countries will now be making their own assessments of their defence posture, spending, and strategy, and also the path forward for the region collectively, how to avoid the missteps which led to war in Ukraine, in Europe.

“And that is a question which needs to be examined not just by small countries, but also by the big countries. Because when you end up in a conflict, it is very seldom only one side which caused the problem.”

As for China’s actions in the South China Sea, Mr Lee said: “I do not think that the impact is considerable because in the South China Sea, there is a process going on to discuss a Code of Conduct between ASEAN and China, and the claimant states are all involved.”

Although it will be a difficult negotiation, Mr Lee said the countries understand this and generally do not want clashes to take place in the South China Sea.

As for Taiwan, Mr Lee said it is a “very complex issue on its own”.

“I am sure the Chinese are studying carefully the lessons of the war in Ukraine. And I am sure on the other side of the Straits, Taiwan is also studying carefully the lessons,” he said, adding that he hopes China and Taiwan will draw conclusions which will help them to manage the issue “wisely”.

Mr Lee noted that while a conflict may be easy to start, it is very difficult to tell how it will end.

“You have to assess not just what happens in the direct conflict, but the broader consequences. Internationally, how other countries will react, how it affects your standing internationally, and also the price of the war and bloodshed,” he said.

“The only thing worse than a battle won is a battle lost. So even if you win the war, whoever declares that they have won the war in Ukraine, would have paid a very heavy price.

“And I hope that in the Taiwan Straits, these lessons will be pondered and the parties will be able to manage the situation in a prudent, peaceful way.”


Mr Lee was also asked about the cooperation between Singapore and Japan and the areas where there is room for improvement.

He pointed to civil aviation, saying Singapore would like to strengthen air links with Japan, especially flights to Haneda.

“The demand is there. Japan is still now restricting travel, but very soon, you will change your rules and we should prepare for that,” Mr Lee said.

He added that the Japan-Singapore Economic Partnership Agreement (JSEPA), which was established in 2002, needs to be updated again.

“Japan has not been able to do this because you were preoccupied negotiating the TPP and the RCEP. But those are now settled so I hope that we can now start to discuss upgrading our JSEPA,” he said.

The digital economy is another area for cooperation, said Mr Lee, pointing to Singapore’s Smart Nation initiative and Japan’s Digital Garden City Nation Vision.

“We can learn from one another to develop smart cities and how to do digital governance. Every country in the world is trying to do this. Some like Estonia have gone very far. In Singapore we have several initiatives, some further advanced than others. We continue to learn from one another,” he added.

The green economy is also a promising area, said Mr Lee, highlighting cooperation on alternative energy and developing sustainable economies.