While Singapore’s monetary authority maintained its view that the economy will grow 1-3 percent this yr, it said in its semi-annual Macroeconomic Review released on Friday that the outlook relies on a worldwide shift toward monetary easing and a technological recovery.
“Risks from higher and longer global interest rates and volatility in capital flows remain,” MAS said within the report. “Escalating geopolitical conflicts could also lead to a sharp increase in financial market tensions and increased uncertainty, worsening global and domestic growth prospects.”
MAS expects the U.S. Federal Reserve to start cutting borrowing costs within the third quarter, which, combined with a recovery in global chip sales, could help keep Singapore’s GDP growth near its potential rate throughout 2024.
Singapore’s rising currency and economy give Lawrence Wong plenty to smile about
Singapore’s rising currency and economy give Lawrence Wong plenty to smile about
The events of the last week show how quickly and drastically shocks can wreak havoc on the worldwide and domestic economy. Fear of a wider conflict within the Middle East and better oil prices have triggered sharp currency swings, renewed price pressures and a return to hawkish central banking across Asia. Investor bets on a Fed rate cut have been pushed to later this yr, if not next yr.
For now, Singapore’s policymakers have maintained their estimates of core and headline inflation at a mean of two.5-3.5 percent this yr, saying that “within the absence of recent, larger cost shocks, the disinflationary trend should reassert itself.”
At the start of the month, the central bank maintained a restrictive monetary policy, fearing still increased price pressure.
“Risks to the inflation outlook continue to evolve in the face of increased global uncertainty, including from geopolitical tensions,” MAS said in its report.
“Barring further shocks, MAS assesses that the prevailing rate of appreciation of the monetary policy band is necessary to maintain the containment effect on imported inflation and domestic cost pressures, and is sufficient to ensure medium-term price stability.”
Singapore’s economy grew slower than forecast in the primary quarter as spending growth from tourism and concert events did not offset a decline in manufacturing.
That underscores concerns for the federal government, which Wong warned in his February budget speech, that the town cannot afford a chronic period of slow growth lest it begin to erode living standards.
