Singapore retains monetary policy with economic recovery expected in 2021

By Massita Ahmad

SINGAPORE, Oct 15 (NNN-BERNAMA) — The Monetary Authority of Singapore (MAS) will maintain a zero percent per annum rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band.

“The width of the policy band and the level at which it is centred will remain unchanged,” the republic’s central bank said in its latest Monetary Policy statement posted on its website.

According to MAS, the Singapore economy is expected to see a recovery in 2021, alongside receding disinflation risk.

However, it said the underlying growth momentum will be weak, and the negative output gap will only narrow slowly in the year ahead.

Core inflation will rise gradually and turn positive in 2021, but remain well below its long-term average at zero to one per cent next year, it said.

“As core inflation is expected to stay low, MAS assesses that an accommodative policy stance will remain appropriate for some time.

“This will complement fiscal policy efforts to mitigate the economic impact of COVID-19 and ensure price stability over the medium term,” said the central bank.

According to the Advance Estimates released by the Ministry of Trade and Industry on Oct 14, the Singapore economy expanded by 7.9 per cent on a quarter-on-quarter, seasonally-adjusted basis in the third quarter (Q3) 2020, after a 13.2 per cent decline in Q2.

Compared to a year ago, gross domestic product fell by 7.0 per cent in Q3, moderating from the 13.3 per cent contraction in the preceding quarter.

The Singapore economy is forecast to contract by five to seven per cent this year.

S$NEER is the exchange rate between the Singapore dollar and a basket of currencies of the country’s major trading partners.

The country does not use interest rates as a monetary policy tool to ensure prices of goods and services remain stable.

Singapore’s Monetary Policy statements are issued twice a year, in April and October.