Singapore tightens monetary policy on steady economic growth

Singapore (VNA) – The Monetary Authority of Singapore (MAS) on October 12 decided to tighten its monetary policy for the second time this year, forecasting the economy to expand steadily and core inflation to rise.

The MAS would slightly increase the slope of the Singapore dollar nominal effective exchange rate policy band, in a “measured adjustment” to its monetary policy. This was followed the slight increase in the slop of the policy band in April from zero percent previously.

Following the announcement, the Singapore dollar gained less than 0.1 percent to 1.3758 against the US dollar.

The Singaporean economy is foreseen to expand at a slower pace for the rest of this year and the whole 2019 while the inflation rate will experience modest but continuing pressures before leveling off at just below 2 percent over the medium term.

The tightening comes despite advance official estimates from the Ministry of Trade and Industry showing that the country’s economic grew 2.6 percent in the third quarter of 2018, as compared to the strong growth of 4.1 percent in the previous three months.

On a quarter-on-quarter basis and seasonally adjusted, the economy expanded by 4.7 percent during July-September, faster than the 1.2 percent growth in the previous quarter.

Manufacturing grew by 4.5 percent year on year, the numbers falling short of the more than 10.6 percent growth seen in the second quarter. The growth was mainly due to the decline in global demand for electronic products. Meanwhile, the construction sector contracted by 3.1 percent, spurred by weakness in the public sector construction projects.

In stark contrast, the service industry grew by 2.9 percent, backed by the finance and insurance, business services, and wholesale and retail trade sectors.

The MAS forecasts the gross domestic product (GDP) growth in 2018 will come in within the upper half of the 2.5-3.5 percent forecast range in 2018 and moderate slightly in 2019.

MAS Core Inflation will come in within the forecast range of 1.5-2 percent for 2018 as a whole, and average 1.5-2.5 percent in 2019. The inflation of consumer price index for all items (CPI-All Item) is predicted to be about 0.5 percent in 2018 before picking up to 1-2 percent in 2019.-VNA