Singapore’s central bank held interest rates steady on Monday, as the economy showed signs of improvement in the third quarter. However, analysts expect a potential policy easing early next year due to external risks.
The Monetary Authority of Singapore (MAS) decided to keep its exchange rate policy unchanged, maintaining the current rate of appreciation.
MAS indicated that inflation risks are more balanced now, with overall growth picking up.
Recent trade data shows that the GDP grew by 4.1% year-on-year in the third quarter, driven by an increase in manufacturing, up from 2.9% in the second quarter. Policymakers are optimistic about future growth.
OCBC economist Selena Ling believes the growth outlook is positive, but noted concerns regarding global political tensions and trade conflicts that could affect Singapore. She suggested MAS might ease policy in January.
Economist Shivaan Tandon from Capital Economics agrees, stating that a tight monetary policy could soon prompt the MAS to adjust its stance.
MAS expects GDP growth for 2024 will be at the upper end of the revised forecast from 2.0% to 3.0%, while acknowledging significant external risks ahead.
“Escalating geopolitical and trade tensions could significantly impact investment and trade,” the MAS warned.
As a trade-dependent economy, Singapore is seen as a key indicator of global growth trends.
MAS projects core inflation to decline to around 2% by the end of 2024, down from a peak of 5.5% earlier this year.
`
