Fitch Solutions is maintaining its expectations that the Monetary Authority of Singapore (MAS) will keep its monetary policy unchanged through 2021, along with its Singapore real GDP growth forecast of 5.8% for the year.

The reiterated expectations follow MAS’ half-yearly review as well as Singapore’s 1Q2021 GDP figures released by the Ministry of Trade and Industry (MTI) on April 14.

MAS left its slope, width and mid-point of the Singapore dollar nominal effective exchange rate (S$NEER) policy band unchanged. It also expects inflation to gradually pick but remain benign and low in 2021, with a revised forecast range of 0.5% to 1.5% in 2021.

The team at Fitch Solutions shares MAS’ inflation assessment, which it says will allow MAS to maintain an accommodative monetary policy stance.

To that end, the team has revised its 2021 average consumer price inflation forecasts to 1.0% y-o-y from 0.5% y-o-y previously, which it attributes to the strong performance of the Singapore economy and a quicker-than-expected tightening of labour market conditions that will boost consumer demand.

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The team adds that MAS is likely to stand pat on its accommodative policy stance to avoid derailing the recovery in 2021, as travel and related sectors, which account for 10% - 20% of the economy, will remain under heavy pressure.

Fitch Solutions’s retained its 2021 real GDP growth forecast of 5.8% after advanced estimates reported by MTI showed Singapore's GDP growing y-o-y for the first time since the pandemic began. 

“The relatively strong performance of 0.2% y-o-y growth in 1Q2021, which outperformed consensus estimates of -0.2% y-o-y growth, gives us confidence in our view that Singapore will see unusually strong growth figures off a very low base in 2020 during which the economy contracted by 5.2% in real terms,” the team writes.

The team's forecast sits at the upper end of the government’s own 4% - 6% growth forecast for this year. 


SEE: Singapore's NODX surpasses expectations with 12.1% growth in March


The team expects private consumption and fixed investments to contribute positively to growth as global vaccination campaigns and government measures boost recovery.

Fitch Solutions forecasts private consumption to grow by 5% in 2021 driven by improving labour market dynamics and low base effects in 2020, while investments are expected to turn positive with a growth rate of 2.5% as government support encourages business to invest in preparation for the post-pandemic economy. The team also believes Singapore’s performance in vaccinating and focusing on emerging opportunities will give it a head start in attracting foreign capital as the global economy recovers.

Net exports are expected to grow 13.4% in 2021, as trade with China resumes closer to pre-pandemic levels.

“Net exports will likely benefit more strongly from China’s recovery in 2021, as the decoupling effect of the different timings at which the pandemic disrupted the Chinese and other Asian economies dissipates,” the team explains.

However, the team forecasts that government consumption will contract 5% in 2021, as the government seeks to rationalise spending after the historic deficit incurred in 2020 to support the economy against Covid-19.