Singapore eases monetary policy twice this year to keep GDP positive

14 October 2015

Singapore's central bank eased monetary policy for the second time this year to re-energise an economy that narrowly avoided a recession in the third quarter. The Monetary Authority of Singapore (MAS) did not expand money supply aggressively, but within limits.

Seeing Singapore's growth ''slightly weaker than earlier envisaged,'' Singapore's central bank said it ''continue with the policy of a modest and gradual appreciation of the S$NEER policy band. However, the rate of appreciation will be reduced slightly.''  But the MAS said there will be ''no change to the width of the policy band and the level at which it is centered.''

The advanced estimate of Q3 GDP, released along with MAS's policy statement showed an annualised quarter over quarter increase of 0.1 per cent, which means the economy avoided a technical recession by narrow margin

The MAS still expects growth to come in at around 2-2.5 per cent this year and next, which it also considers as close to the economy's potential.

Singapore, Southeast Asia's only advanced economy, narrowly avoided a technical recession in the third quarter helped in large measure by the service sector countering faltering demand for the region's goods as China's slows down pulled down demand across the region and beyond.

While manufacturing contracted in the last four quarters, service sector output expanded over the same period, the trade ministry reported.

Service sector exports accounted for almost 27 per cent of total trade last year, up from about 20 per cent a decade earlier, the government said earlier this year. 

Analysts expects domestic-oriented services in Singapore to expand at a moderate pace due to better demand for healthcare and education services as well as public infrastructure spending, while the near-term outlook for manufacturing is weak.

Service sector added 11,400 jobs in the second quarter compared to the previous three-month period, while 3,500 jobs were lost in the manufacturing sector. 

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