The central bank declares that Singapore's development is uncertain; the battle against inflation continues

July 6, 2023: On Wednesday, Singapore’s central bank cautioned that the near-term growth view for one of Asia’s top financial hubs “remains uncertain with downside risks” even as the effects of its monetary tightening cycle work towards cooling inflation.

On Wednesday, an annual review by the Monetary Authority of Singapore, or MAS, chief Ravi Menon said Singapore’s near-term growth would remain weak as prospects had dimmed. Still, inflation should reduce by year-end, although he stressed the fight to contain it was not yet over.

Menon told a press conference that MAS now forecasts 2023 headline inflation at 4.5% to 5.5%, gradually than the 5.5% to 6.5% seen earlier.

He added that core inflation would be significantly lower at 2.5% to 3.0%.

Chairman Tharman Shanmugaratnam said in a report that gross domestic product growth would be at the mid-point of the 0.5% to 2.5% range expected this year, down from 3.6% in 2022.

The central bank’s monetary policy stays “steadfastly focused on medium-term price stability,” he said.

MAS left its monetary policy settings unchanged in April for the first time in two years, reflecting concern about Singapore’s growth outlook. The city-state’s economy contracted in the first quarter, raising fears of a recession.

That move surprised economists, who had expected a sixth straight round of tightening in a streak that had included two off-cycle tightening moves in 2022.

Singapore was also well positioned for a 2024 sales tax hike if inflation drops to 2.5% to 3% in the final quarter of this year, Menon said.

The central bank’s monetary policy drawing streak had been reflected in a net loss of 30.8 billion Singapore dollars, or $22.81 billion, in the fiscal year 2022-2023, he said.

In its annual report, MAS said inflation has been on a “broad moderating path,” falling to 4.7% in May compared to the 5.4% recorded in the first quarter of this year.

It said Singapore was told to developments in the global economy, and things would remain uncertain in the near term.

“Should latent vulnerabilities in the international financial system emerge in the coming months, consumer and investor confidence could take a further hit, with adverse implications for the broader economy,” MAS said.