View of the MAS building, Singapore
Lee Yen Nee
Singapore made his monetary policy easier for the second time in a row on Monday, since the city state does not see any growth this year as a possibility after publishing an expected GDP expansion of 3.8% for the first quarter.
The Singapore monetary authority also facilitated its political stance in January and solved politics for the first time in 2020.
The quarterly GDP growth of Singapore compared to the previous year missed the expectations of 4.3% of the economists surveyed by Reuters and was lower than the expansion observed in the last quarter of 2024 by 5%.
The state's Ministry of Trade and Industry downgraded its GDP forecast to 0% -2% for 2025, which also forecast WAR -MAS's GDP growth of 0% -2% for 2025.
In a press release, MTI said that the slowdown of growth was due to a decline in production and to some service sectors such as finance and insurance.
The Ministry said that due to the tariffs raised by the USA and the US China trade war, the growth prospects for both the USA and China will deteriorate.
The MAS said on Monday that it would reduce the value of the appreciation of its political band, known as the nominal effective exchange rate from Singapore, or S $ Neer.
“MAS is continued with the politics of a modest and gradual appreciation of the S $ Neer policy band,” says the perspective.
The central bank strengthens its currency compared to a basket of its main trading partners, which effectively defines the S $ NEER. The exact exchange rate is not determined, but the S $ Neer can move within the defined guideline band, the exact levels of which are not announced.
Weaker growth prospects
MTI said that Singapore “significantly weakened” external demand prospects. It has been emphasized that the manufacturing trade was probably negatively influenced by weaker worldwide demand, and services such as finance and insurance could record a slowdown.
This is due to risk-off feelings that have a disadvantage on the net fees and commission income of the segments of banking, funds, forex and security trade.
The production as well as the finance and insurance sector are some of the largest participants in the economy in Singapore and make up about 17% and 14% of its GDP.
In an explanation at the beginning of this month, the Prime Minister of Singapore Lawrence Wong said that he “undoubtedly” had a significant impact on Singapore's growth. “Singapore can go to a recession this year or not.”
MAS lowered headline inflation for 2025 to an average of 0.5%-1.5%on Monday, which is due to a previous projection of 1.5%-2.5%.
The core inflation forecast, which also reduces the prices for accommodation and private transportation to 0.5%-1.5%, which predicted 1%-2%for the forecast after the January meeting.
Brian Lee, economist at Maybank Investment Banking Group Research, said that the MAS's step corresponds to expectations. This was “in the middle of the weakly external prospects and the modest inflation,” he told CNBC.
Lee expects the growth of Singapore to be slowed down due to uncertainty in the upcoming quarters and that the Asian supply chains affect the Asian supply chains as a shock of costs.
“Singapore is a crucial upstream node in this supply chain and is strongly exposed to the worldwide demand as a small and open economy,” said Lee, adding: “We are increasing in a growth, but no recession in this phase.”
Maybank predicts GDP growth of Singapore at 2.1% for 2025, just above the upper end of the new forecast by MTI.
Comments are closed.