S’pore cen­tral bank sees sub­dued GDP out­look

> Likely to keep in­fla­tion­ary pres­sures mod­est due to weaker global de­mand

The Sun (Malaysia) - - SUNBIZ -

SIN­GA­PORE: A sub­dued growth out­look for Sin­ga­pore’s trade-re­liant econ­omy is ex­pected to keep in­fla­tion­ary pres­sures mod­est, the cen­tral bank said yes­ter­day, high­light­ing a bumpy road ahead for the city state amid lin­ger­ing weak­ness in global de­mand.

Sin­ga­pore’s econ­omy is likely to have a small neg­a­tive out­put gap in 2016, and the gap could widen slightly next year, the Mon­e­tary Author­ity of Sin­ga­pore (MAS) said in its hal­fyearly macroe­co­nomic re­view.

“Amid a sub­dued out­look for GDP growth, emerg­ing slack in the labour mar­ket, and con­tained im­ported in­fla­tion, the medium-term out­look for MAS core in­fla­tion is for it to trend grad­u­ally to­wards the his­tor­i­cal av­er­age of 2%.”

There could be down­side risks to the in­fla­tion out­look if weak­ness in global de­mand per­sists, it added.

Ear­lier this month, the cen­tral bank held its ex­change-rate based mon­e­tary pol­icy steady de­spite a sur­pris­ingly sharp eco­nomic con­trac­tion in the third quar­ter.

The MAS said a neu­tral pol­icy stance will be needed for an “ex­tended pe­riod”, un­der­scor­ing a dim out­look for the econ­omy with a grow­ing num­ber of an­a­lysts say­ing the risk of a re­ces­sion meant the cen­tral bank could be forced into an off-cy­cle eas­ing.

Over the past two years, Sin­ga­pore’s econ­omy has been hob­bled by a slow­down in China, weak global de­mand and falls in global oil prices.

The MAS said the cu­mu­la­tive ef­fects of its pol­icy eas­ings since Jan­uary 2015 will con­tinue to pro­vide sup­port to eco­nomic growth and help en­sure medium-term price sta­bil­ity.

The MAS re­it­er­ated that core in­fla­tion is ex­pected to av­er­age around 1% this year and rise to 1-2% in 2017.

En­ergy-re­lated com­po­nents will be­gin to con­trib­ute pos­i­tively to in­fla­tion, the cen­tral bank said.

Global oil prices have risen nearly 38% so far this year, but are still down more than 55% from their mid-2014 peak above US$115 (RM478.40) a bar­rel.

The all-items con­sumer price in­dex is likely to turn pos­i­tive in the fourth quar­ter of this year, the MAS said. It kept its fore­cast for head­line in­fla­tion to rise to 0.5-1.5% in 2017 from around - 0.5% this year.

All-items CPI has de­clined from a year ear­lier for a record 23 straight months, weighed down by falls in oil prices, lower hous­ing costs and falls in the prices of car per­mits.

MAS said its anal­y­sis sug­gests that “nearly three-fifths of the ef­fects from MAS’ past pol­icy eas­ing moves since Jan­uary 2015 have yet to be trans­mit­ted through to the econ­omy.” – Reuters

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