Singapore’s fight against inflation still on amid uncertain growth outlook

  • Singapore’s central bank warned on 5 Jul of weak near-term growth for one of Asia’s top financial hubs and said its fight against rising prices was not yet over, even as it lowered its 2023 headline inflation forecast.
  • In an annual review by the Monetary Authority of Singapore (MAS), Managing Director Ravi Menon said Singapore’s inflation would ease significantly thanks to a tight monetary policy stance, but the central bank would “not switch from inflation-fighting mode to growth-supporting mode”.
  • Headline inflation slowed to 4.7% in May 23 compared to the 5.4% recorded in the 1Q23.
  • MAS now forecasts 2023 headline inflation at 4.5% to 5.5%, lower than the 5.5% to 6.5% seen previously, Menon told reporters.
  • Core inflation is seen at 2.5% to 3.0% by the end of the year, versus an earlier 2.5% forecast because of rising travel-related costs, he added.
  • MAS is ready to adjust monetary policy, “especially if inflation momentum were to re-accelerate,” Menon said. “We are closely monitoring the evolving growth-inflation dynamics and remain vigilant to risks on either side.”
  • The central bank left its monetary policy settings unchanged in Apr 23 for the first time in two years as Singapore’s economy contracted in 1Q23, raising fears of a recession.
  • Singapore was also well positioned for a second hike in its goods and services tax in 2024 if inflation falls to 2.5% to 3% in the final quarter of this year, Menon said. The sales tax will increase to 9% in Jan 24, after increasing from 7% to the current 8% at the beginning of 2023.
  • The central bank’s monetary policy tightening streak was also reflected in a net loss for the MAS of SGD30.8bn (USD22.81bn) in the fiscal year 2022-2023,

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