World Economy
0

Singapore Central Bank May Tighten Policy

For the whole of 2017, Singapore’s trade-reliant economy grew 3.5%.For the whole of 2017, Singapore’s trade-reliant economy grew 3.5%.

Singapore’s economic growth slowed in the fourth quarter as factories lost steam, but a services sector recovery has bolstered expectations the central bank could tighten monetary policy as early as April, sending the local currency higher.

The economy expanded 3.1% in the October-December quarter from a year earlier, advance estimates from the ministry of trade and industry showed on Tuesday, slowing from the third quarter’s upwardly revised 5.4% growth, which was the fastest on-year growth in nearly four years, Reuters reported.

On an annualized and seasonally-adjusted basis, gross domestic product expanded 2.8%, well-down from revised growth of 9.4% in the third quarter.

While the quarter-on-quarter growth figure was slightly below the median expectation in a Reuters poll of economists, growth seen in the services sector has fanned market expectations the Monetary Authority of Singapore could tighten policy in 2018.

“The details looked a bit better, such as the upward revisions to Q3,” said Vishnu Varathan, head of economics and strategy for Mizuho Bank in Singapore.

The firmer views on central bank policy helped send the Singapore dollar to as high as S$1.3331 per US dollar, its strongest level since June 2016. The local currency was also supported by a broadly weaker greenback and was last up about 0.3% on the day at S$1.3335.

For the whole of 2017, the city-state’s trade-reliant economy grew 3.5%, at the top end of the government’s official 3.0 to 3.5% forecast range. This was the fastest pace in three years and helped by improved global demand, particularly for electronics products and components such as semiconductors.

The government has previously said it expects growth of 1.5 to 3.5% in 2018.

At its last semi-annual policy meeting in October, the central bank held monetary policy steady but changed a reference to maintaining current settings for an extended period, a shift that analysts said created room for a tightening this year. The latest growth data has done little to dissuade such expectations for monetary tightening.

“We still hold the view that the MAS is likely to tighten this year, but maybe October rather than April,” said Selena Ling, head of treasury research and strategy for OCBC Bank.

The pick-up in economic growth has helped bolster activity in the city-state’s property market, with private housing prices rising 1% in 2017 for the first annual gain since 2013, according to separate data released on Tuesday.

Add new comment

Read our comment policy before posting your viewpoints

Financialtribune.com