By Jun Yuan Yong
SINGAPORE (Reuters) -Singapore is expected to leave settings unchanged at its monetary policy meeting next week, as the city-state’s growth outlook remains resilient despite a slowdown in trade due to U.S. tariffs.
Of 14 analysts polled by Reuters, 10 expect the Monetary Authority of Singapore (MAS) to hold off making changes in its scheduled review on October 14.
Maybank economist Chua Hak Bin said a construction boom, generous fiscal support and falling interest rates have cushioned the blow from a trade slowdown.
“Some economic segments appear to be strengthening during the third quarter, judging by the readings for retail sales, hospitality, property transactions, bank lending, trading volumes and IPO deals, which will help cushion the contraction in exports,” he said.
Similarly, ANZ head of Asia research Khoon Goh said uncertainty about Singapore’s outlook has eased, even as risks relating to U.S. economic policy increase.
“While the impact of tariffs on the global economy is still to be felt, and unwinding of frontloading activity will lead to a slowdown in growth for the Singapore economy, there is some offset from the ongoing strong global semiconductor cycle on the back of the AI-related investment boom,” he said, adding that Singapore could again upgrade its 2025 growth forecast as well.
The government last upgraded its GDP growth forecast range for 2025 to 1.5% to 2.5% from 0.0% to 2.0% in August after a better-than-expected first-half performance.
The MAS kept monetary policy settings unchanged in July after second quarter economic growth surprised to the upside and global trade tensions eased somewhat. The MAS eased twice in January and April this year on tariff concerns after holding settings since a tightening in October 2022.
Instead of using interest rates, Singapore manages monetary policy by letting the local dollar rise or fall against the currencies of its main trading partners within an undisclosed trading band, known as the Singapore dollar nominal effective exchange rate, or S$NEER.
It adjusts settings via three levers: the slope, mid-point and width of the policy band.
Meanwhile, inflationary pressures appear benign as Singapore’s key consumer price gauge rose 0.3% in August, the smallest annual increase since February 2021.
Singapore’s exports to the U.S. are subject to a 10% baseline tariff despite a free trade agreement in place since 2004.
The tariff is lower than those imposed on its Southeast Asian neighbours, but sectoral tariffs – such as 100% pharmaceutical tariff on branded drugs – remain a concern. Singapore exports about S$4 billion ($3.10 billion) of pharmaceutical products to the U.S., most of which are branded drugs.
In July, MAS said the effective U.S. tariff rate on Singapore’s exports stood at 7.8%, up from 6.8% in April.
This month’s MAS decision comes as central banks globally have eased policy through the year.
The European Central Bank left interest rates unchanged in September and maintained an upbeat view on growth and inflation, after halving its key rate in the year to June to 2%.
Meanwhile, the U.S. Federal Reserve lowered its policy rate by 25 basis points last month as a softening job market remained top of mind for policymakers.
Among the economists expecting MAS to ease policy is Denise Cheok from Moody’s Analytics who said August’s non-oil domestic exports and industrial production were “far worse than expected” and an indication that the boost from front-loading is set to wane in coming months.
Fading imported inflation due to low global oil prices gives the central bank room to ease monetary policy, she said.
(Reporting by Jun Yuan Yong; Editing by Sam Holmes)
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