MAS policy easing on the cards on back of slowing growth: UBS

Weak labour market is a key drag.

The Monetary Authority of Singapore (MAS) is likely to ease policy again in October on back of the republic’s slowing growth, according to a report by UBS
UBS said that the central bank will eventually become less concerned about labour market tightness especially after overall employment declined for the first time in years in the first quarter.

“We expect the MAS will become less concerned about labour market tightness and more concerned about labour market slack. Historically and logically, a deteriorating profit share of GDP heralds a weaker labour demand – although we believe the onset of that weaker labour demand can be delayed by buoyant credit conditions. In 2014 the Gross Operating Surplus – a proxy for profits in the Singapore national accounts – fell to its lowest share of GDP in over a decade,” the report said.

“Moreover, the buoyant credit conditions that may have supported employment while profits were weakening have deteriorated. DBU credit to residents grew only 6.4% in April, down from 12% in 2013. In this context, the weakness in employment growth may be sustained,” UBS added.