Ex­pec­ta­tion on back of stronger growth out­look, less in­fla­tion­ary pres­sure, say an­a­lysts

New Straits Times - - Business -


SIN­GA­PORE’S re­cov­ery from a con­trac­tion last year may give the cen­tral bank lit­tle in­cen­tive to ad­just its pol­icy stance as it mon­i­tors the im­pact of higher United States in­ter­est rates.

The Mon­e­tary Author­ity of Sin­ga­pore (MAS), which uses the cur­rency rather than in­ter­est rates as its main pol­icy tool, will keep its stance un­changed at its next bi-an­nual meet­ing in midApril, ac­cord­ing to 15 of the 16 econ­o­mists sur­veyed by Bloomberg. The MAS shifted to a neu­tral stance of zero ap­pre­ci­a­tion for the lo­cal dol­lar last year.

Cen­tral banks in Asia are con- tend­ing with the risk of cap­i­tal out­flows and weaker cur­ren­cies as the US grad­u­ally raises in­ter­est rates. Here, pol­i­cy­mak­ers can take com­fort in a stronger growth out­look, with econ­o­mists fore­cast­ing growth of 2.3 per cent this year from 2 per cent last year.

“In­fla­tion­ary pres­sures are not re­ally build­ing up that much, so MAS doesn’t need to tighten yet,” said Brown Broth­ers Har­ri­man cur­rency strate­gist Masashi Mu­rata.

“At the same time, eco­nomic growth looks fine, you have the US, China, the eu­ro­zone, all im­prov­ing, which means that Sin­ga­pore’s econ­omy is go­ing to im­prove. That’s why MAS doesn’t need to ease more.”

MAS guides the Sin­ga­pore dol­lar against a bas­ket of cur­ren­cies and ad­justs the pace of ap­pre­ci­a­tion or de­pre­ci­a­tion by chang­ing the slope, width and cen­tre of a band.

The cen­tral bank is fore­cast­ing in­fla­tion will av­er­age 0.5 per cent to 1.5 per cent this year, after al­most two years of de­clin­ing prices.

It sees gross do­mes­tic prod­uct ex­pand­ing one to three per cent this year, partly driven by a pickup of semi­con­duc­tor ex­ports tied to China’s sup­ply chain. Do­mes­tic de­mand is still weak though, with un­em­ploy­ment hit­ting a sixyear high in the fourth quar­ter.

The de­pen­dence on China’s eco­nomic cy­cle may be Sin­ga­pore’s weak spot, said Vanin­der Singh, a Sin­ga­pore-based econ­o­mist at Natwest Mar­kets, a unit of Royal Bank of Scot­land Group Plc. Singh is the only econ­o­mist sur­veyed who is fore­cast­ing the MAS will ease pol­icy in April by re-cen­tring the cur­rency band lower.

“I’ve had an eas­ing call for a while based of the un­der­ly­ing econ­omy,” he said.

“If you look at pri­vate con­sump­tion, the econ­omy is grow­ing only from man­u­fac­tur­ing, this is com­ing from China. China may be go­ing for a soft land­ing, but a soft land­ing in China may still have a sig­nif­i­cant im­pact on Sin­ga­pore.” Bloomberg

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