MAS holds rates as Singapore’s GDP is expected to improve in 2024

The central bank warns that domestic recovery could be weaker than expected.

The Monetary Authority of Singapore maintained its rate for the second time this year as inflation moderated and economic growth beat expectations.

MAS said that Singapore’s GDP growth is expected to improve gradually over 2024. 

According to advance estimates by the Ministry of Trade and Industry, Singapore's economy expanded by 1% QoQ on a seasonally adjusted basis in Q3 2023, up from 0.1% in Q2. Growth picked up on the back of an improvement in the manufacturing sector, whilst activity in some of the domestic-oriented sectors eased. 

MAS predicts that despite the external outlook, prospects for the Singapore economy are muted in the near term but should improve gradually in H2 2024. MAS expects Singapore’s GDP growth in 2023 to come in at the lower half of the 0.5–1.5% forecast range. For 2024, growth is projected to come in closer to its potential rate, with the output gap remaining slightly negative.

The central bank however still cautioned that the global economic outlook remains uncertain and the domestic recovery could be weaker than expected. 

MAS saw core inflation slow down and is projected to broadly decline over the course of 2024. MAS Core Inflation is projected to slow to an average of 2.5–3.5% for the year as a whole. Excluding the impact of the increase in the GST rate in January, core inflation is forecast at 1.5–2.5%.

“Against this backdrop, the current appreciating path of the S$NEER policy band is assessed to be sufficiently tight. A sustained appreciation of the policy band is necessary to dampen imported inflation and curb domestic cost pressures, thus ensuring medium-term price stability,” MAS said.

Meanwhile, MAS announced that starting in 2024, it will be shifting to a quarterly monetary policy statement schedule. It said that this is part of its continuing efforts to enhance monetary policy communications. MAS continues to uphold a medium-term orientation in its policy formulation to secure low and stable inflation. The next monetary policy statement will be released in late January 2024.