From the previous three months, GDP grew 0.1 percent, defying analysts prediction for another quarter-on-quarter contraction, which would have pushed the economy into a technical recession. The sector is already in recession, having contracted in the past four quarters in year-on-year terms and in three out of the past five quarters on a sequential basis.
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The Singapore dollar fell marginally against the USA dollar Tuesday, with commodity prices, China exports data and an impending policy review at the Monetary Authority of Singapore all in focus during a busy trading session.
Australia’s dollar dropped Wednesday after a decision by the nation’s second-largest lender to raise its home-loan rates prompted speculation the central bank will respond by easing policy as soon as next month.
This time round, a confluence of factors such as erratic global demand led by a slower-growing China – a major market for Singapore – and domestic issues such as a tight labor market are among the culprits dampening the outlook of the affluent city-state.
This is the second time it has done so this year after a surprise move in January when it reduced the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band.
“The MAS statement makes clear why it did not take the more aggressive step of moving to a neutral slope or recentring the policy band to allow a one-off depreciation, which a number of analysts had expected”. But that didn’t stop the central bank from easing policy. “This measured adjustment follows the move to reduce the rate of appreciation of the policy band in January this year, and is supportive of economic growth into 2016, while ensuring price stability over the medium term”. That compares expectations for a 1.3 percent rise on-year and a 0.1 percent decline on-quarter, according to analysts’ estimates from a Reuters poll. Since July, however, the S$NEER has weakened and largely fluctuated in the lower half of the policy band.
Shifting the center of the policy band to a lower level would signal the exchange rate should remain on the weak side in the near future.
The full MAS policy statement can be accessed here.
With the easing move, the Monetary Authority of Singapore joined its peers in India and Taiwan who have eased their policies to bolster economic growth in recent weeks.
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The central bank also lowered its inflation outlook for 2015.
