MAS to tighten policy again 2022 - Fitch

Risks, however, are present with the financial troubles faced by the real estate sector in China. 

The Monetary Association of Singapore (MAS) is expected to tighten monetary policy again in 2022, according to a report published by Fitch Solutions. 

This follows a steepening of the slope announced by MAS yesterday. The action is seen by the report as a response to the rising price pressures from elevated commodity prices, tighter labor market conditions and higher capacity utilization rates. 

Fitch Solutions also expects the economy to reach an above-trend growth of 3.6% for 2022, while unemployment is expected to continue its descent from the 2.7% recorded in Q221. 

Average consumer price inflation, meanwhile, is expected to inflate to 2% y-o-y, from the previous year’s 1.6% y-o-y. This has put the prediction in life MAS’ forecast of 2% for 2020. Average inflation, meanwhile, is predicted to hit 2.3% y-o-y, up from the previous 1.7% y-o-y and in the upper band of MAS’ forecast range of 1.5% to 2.5%. This is due to rising commodity prices. 

This comes with its own set of risks, however, as Fitch points to the financial difficulties currently plaguing China’s real estate sector and Evergrande Group’s current predicament. The current problem could implicate the Chinese banking sector in the process, which would cause a slower growth than 5.4% currently predicted for the country. This, in turn, could disproportionately affect an economy like Singapore’s.