Will policy easing revive Singapore’s deteriorating exports?

Weak demand is still a key headwind.

The Monetary Authority of Singapore’s (MAS) decision to abandon its appreciation policy might help restore the city-state’s export competitiveness, but analysts warn that lacklustre global demand will continue to weigh down Singapore’s exports.

“Containing the appreciation of the SGD NEER could mitigate the drag from sluggish external demand,” Deutsche Bank economist Diana del Rosario said in a report. “But in this environment where buoyant demand is scarce, we do not expect a weaker currency to bring a remarkable turnaround in Singapore’s exports,” she added.

UOB economists Francis Tan and Quek Ser Leang noted in a report that Singapore’s export competitiveness has taken a hit from dovish central bank actions since 2015 and the bias for adopting unconventional monetary policies across the globe.

“With that, it is hopeful that the neutral SGD NEER stance will go some way in boosting export competitiveness in the months ahead,” they said.

Margaret Yang, analyst at CMC Markets, said that while the MAS’ move may help exports, it may nonetheless have a negative effect on domestic consumption.

“A weaker SGD against its major trading partners will boost domestic exports and improve the country’s overall competitiveness. To domestic consumers, it means imported products will become more expensive, and it will probably dampen the enthusiasm for overseas trips,” she said.