24 October 2016
The Singapore dollar is expected to weaken 8 percent against the US dollar this year, according to a Bloomberg survey. Photo: Bloomberg
The Singapore dollar is expected to weaken 8 percent against the US dollar this year, according to a Bloomberg survey. Photo: Bloomberg

Singapore monetary easing seen as economy continues to falter

Singapore is poised to ease monetary policy for the second time this year to revive sputtering growth.

The Monetary Authority of Singapore (MAS), the country’s central bank which manages the economy by guiding the currency rather than setting interest rates, is expected to boost stimulus when it meets Wednesday, Bloomberg reports, citing 16 of 25 economists in a survey. The remainder predict no such move.

The MAS eased policy at an unscheduled meeting in January, saying it would seek to slow the pace of the local dollar’s gains versus its trading partners.

At the first of this year’s two scheduled meetings in April, it refrained from further action.

Singapore’s economic performance has worsened since then.

Analysts forecast the economy entered a technical recession in the third quarter while consumer prices dropped for a 10th month in August, the longest streak of declines since the Asian financial crisis.

Analysts predict the currency is on course for its worst year since 1997.

“The MAS has to acknowledge the fact that things have panned out worse than they expected, both in terms of growth, led by external factors, and inflation domestically,” said Nizam Idris, head of currencies and fixed-income strategy at Macquarie Bank Ltd. in Singapore.

Monetary authorities guide the local currency against an undisclosed basket and adjusts the pace of appreciation or depreciation by changing the slope, width and center of a band.

It refrains from disclosing details of the basket, the band, and the pace of appreciation or depreciation.

“With inflation below the long-term average and growth slowing, this suggests that MAS should be in a position to ease policy,” said Khoon Goh, a senior currency strategist at Australia & New Zealand Banking Group Ltd.

The Singapore dollar will decline to S$1.44 to the US currency by year-end, according to the median estimate of a separate Bloomberg survey.

That would translate into a loss of about 8 percent for the year, the worst annual performance since the currency tumbled 17 percent during the Asian crisis in 1997.

The local dollar was at S$1.3979 as of 5 p.m. local time on Monday after depreciating to S$1.4366 on Oct. 2, the weakest level since September 2009.

Singapore’s export-dependent economy has been hurt by slowing growth in China while uneven recoveries in the US and Europe have damped demand for Asian goods.

Gross domestic product shrank 4 percent in the second quarter from the previous three months, the trade ministry said Aug. 11.

GDP contracted 0.1 percent in the third quarter, according to a Bloomberg survey before the advance figures are released Wednesday.Consumer prices dropped 0.8 percent in August, the statistics department said Sept. 23.

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