In its initial review of the year, Singapore’s central bank, the Monetary Authority of Singapore (MAS), opted to retain its current monetary policy settings, aligning with expectations. The decision was influenced by the ongoing moderation of inflation pressures and an optimistic outlook for economic growth.
MAS affirmed its commitment to uphold the existing rate of appreciation within its exchange rate-based policy band, known as the Nominal Effective Exchange Rate (S$NEER). Notably, there were no alterations made to the width or center level of the band.
Anticipating a robust economic rebound in 2024, MAS stated, “Barring any further global shocks, the Singapore economy is expected to strengthen in 2024, with growth becoming more broad-based.” The central bank acknowledged that core inflation might remain elevated in the early part of the year but is anticipated to gradually decline, reaching a lower level by Q4 and continuing the descent into the following year.
Maybank economist Chua Hak Bin interpreted MAS’s decision as maintaining a tightening bias, citing both core and headline inflation gauges exceeding 3%, surpassing historical comfort zones. December’s core inflation, at 3.3% year-on-year, exhibited a slowdown from its peak of 5.5% earlier in the preceding year.
MAS projected that core inflation would ease to an average of 2.5–3.5% for 2024, with the current quarter experiencing a temporary uptick due to a 1 percentage point sales tax hike implemented in January, resulting in what MAS termed a “transitory impact.”
According to advance estimates from the trade ministry, the fourth quarter of the previous year witnessed a 2.8% year-on-year increase in Gross Domestic Product (GDP). The full-year GDP for 2023 recorded a 1.2% growth, and the trade ministry forecasts a 1-3% expansion for 2024.
While expressing optimism about the Singapore economy’s prospects in 2024, MAS acknowledged the existence of both upside and downside risks to the inflation outlook. OCBC economist Selena Ling interpreted this as an indication of an extended policy pause for MAS, suggesting that the next monetary policy announcement in April is likely to be another hold. Ling proposed that any consideration of easing might only materialize later in the year when core inflation exhibits a more convincing decline.
Monday’s policy decision marked the first under MAS’s new quarterly review schedule, replacing the previous semi-annual announcements. The central bank had maintained an unchanged monetary policy in both April and October of the preceding year, reflecting concerns about economic growth after a sequence of five consecutive tightening reviews. As a trade-reliant economy, Singapore adopts a distinctive approach to monetary policy, adjusting the exchange rate of its dollar against a basket of currencies rather than relying on domestic interest rates, as is more common in other countries.
