Singapore still on track for policy normalisation

SINGAPORE – ANZ Bank is downgrading its 2018 full year GDP growth forecast for Singapore to 3.5% from 4.0% previously, but maintaining its 2019 forecast at 3.0%.

Singapore’s economy expanded by 4.2% in the first half, but growth is expected to moderate in the second half due to less favourable base effects, some slowing in exports amid heightened trade tensions, and a smaller than initially anticipated boost from the property sector due to latest cooling measures from the Government, ANZ says.

“Although CPI-All Items inflation has stayed moderate, the MAS Core Inflation has risen to a near four-year high of 1.9% y/y in August.

“We expect some modest price pressures from an improving labour market, and now expect core inflation to average 1.8% in 2018 and 2.0% in 2019, which is 0.2% higher than our previous forecasts in both years.”

ANZ says that, although ongoing US-China trade tensions pose downside risks to the external growth outlook, the Singapore economy is expected to expand at a moderate pace, with core inflation heading slightly above its long-term average towards the end of the year.

“Therefore, we expect the Monetary Authority of Singapore (MAS) to continue its policy normalisation with another slight increase in the slope of the S$NEER policy band at the October Monetary Policy Statement to ensure medium-term price stability.

“This will support the Singapore dollar, which we see appreciating to 1.33 against the US dollar by the end of the year.” www.live.anz.com (ATI).