CFA Society Singapore
SINGAPORE (Apr 3): Maybank Kim Eng expects the Monetary Authority of Singapore to maintain its current monetary policy stance at the April meeting as growth slows sharply and core inflation eases.
This comes after two straight tightening moves in Apr and Oct last year, when the MAS steepened the S$NEER appreciation bias slightly.
Dampening growth outlook is a stronger Singapore dollar; rising domestic interest rates; additional property curbs and stricter foreign worker measures, says Maybank.
Slowing global growth, fading global electronics demand and the US-China trade war are also hurting exports and investment.
Budget 2019 introduced the Merdeka Generation Package which may provide a small positive spending stimulus in the second half, as 500,000 Singaporeans will receive their Merdeka cards in June and first Medisave top-up in July.
“We think MAS, like many other central banks, can afford to be patient,” says Maybank economist Chua Hak Bin in a Tuesday report.
Maybank is forecasting GDP growth of only 1.8% in 2019 and 2.1% in 2020, well below the 3.2% in 2018.
First quarter GDP growth probably weakened to about 1.2% by Maybank’s estimates, down from 1.9% in 4Q18 and 2.4% in 3Q18.
Monetary conditions have tightened, with the 3M Sibor climbing to 1.9% in March from 1.1% at the start of 2018.
Manufacturing likely stagnated in 1Q as global electronics cycle fades and US-China trade war hit growth.
Growth in services is also slowing due to weaker trade-related services, falling real estate transactions and softer loan growth.
Core inflation eased to a 9-month low of 1.5% in Feb, which is the lower bound of MAS’s core inflation forecast range of 1.5% - 2.5%.
As the Open Electricity Market is having a greater than expected impact on prices, Maybank expects MAS to lower its core inflation forecast to 1% - 2%.
Headline inflation is expected to pick up to 1.2% vs 0.4% in 2018. COE prices have bottomed and are rising steadily, which will translate to a rebound in private transport costs.