With past tightening moves still impacting the economy, MAS anticipates inflation will ease while monitoring risks of a deeper economic slowdown.
SINGAPORE: The Monetary Authority of Singapore (MAS) has opted to maintain its current monetary policy, holding off on further tightening to address inflation pressures. In its semi-annual policy statement on Friday (Apr 14), the MAS described this stance as “appropriate for securing medium-term price stability,” while noting the potential for a “deeper than anticipated” economic slowdown amid global uncertainties.
MAS will continue with the prevailing appreciation rate of its Singapore dollar nominal effective exchange rate (S$NEER) policy band, leaving the width and mid-point unchanged. This pause follows five tightening moves since October 2021, aimed at tempering inflation. With current measures still expected to reduce inflationary pressures, MAS highlighted that the appreciating path of the S$NEER remains suitable to curb import and domestic cost increases.
Headline inflation forecasts for 2023 remain between 5.5% and 6.5%, with core inflation anticipated at 3.5% to 4.5%.
Economic Growth Slows
This policy decision accompanies data showing slower economic growth. Preliminary figures reveal that Singapore’s GDP grew by only 0.1% year-on-year in Q1 2023, a decrease from the 2.1% growth seen in the previous quarter. On a quarter-on-quarter basis, GDP contracted by 0.7%.
With Singapore’s economic growth projected to remain “below trend” this year, MAS pointed to the downturn in global electronics, tightening financial conditions, and fading demand boosts from regional reopenings. China’s recovery is expected to be consumption-driven and service-oriented, dampening demand for regional exports.
MAS stated it will monitor economic and financial developments closely, staying vigilant in an uncertain environment for both inflation and growth.
