AGAINST the backdrop of high inflation and interest rates, gig workers are found to be the most financially stretched among all of DBS’ customer groups.

Defined by DBS as self-employed contract workers providing various services to earn a living, “gig workers” include those who rely heavily on online platforms for their income.

In a report released on July 13, DBS noted that gig workers’ savings have fallen year-on-year to an “unhealthy range” as they are tapping into their savings to meet expenditure needs. The study revealed that their median savings for May 2023 dropped to 1.7 months of expenses, down from 1.9 months in the same month last year. In comparison, DBS’ median customers had savings amounting to 3.5 months of expenses.

The bank recommends that those with unstable income streams maintain savings of 12 months of expenses, while a range of three to six months is advised for other customers.

The expense-to-income ratio for gig workers stood at 112 percent in May 2023, significantly higher than the 57 percent ratio of the median customer. This indicates that gig workers are not earning enough to cover their spending due to less stable income flows.

DBS advises this income group to exercise financial prudence given their tight budgets while balancing short- and long-term needs. Proposed solutions include saving at least 12 months’ worth of monthly expenses and making Central Provident Fund contributions to leverage attractive long-term interest rates.

“Some segments of society could potentially find themselves in a double-whammy situation, where inflation continues to dilute their purchasing power and erode savings, while high interest rates take a toll on their balance sheets,” stated DBS senior economist Irvin Seah.

Seah noted that customers across various age and income groups have been using credit cards more frequently over the past year and cautioned individuals to be mindful of bill payments. He advised leveraging credit card deals and rewards to maximize financial resources.

In the first five months of 2023, Singapore’s average headline consumer price index and core inflation stood at 5.9 percent and 5.1 percent, respectively, compared to pre-pandemic historical averages of 1.7 percent and 1.5 percent from 2010 to 2019.

DBS forecasts a slowdown in real gross domestic product growth to 1.7 percent in 2023, down from 3.6 percent last year. The bank also noted that inflation remains high, despite easing from its peak of 7.3 percent year-on-year in Q3 2022.