Singapore’s central bank expects GDP growth at the higher end of the forecast range, while core inflation remains stable
The Monetary Authority of Singapore (MAS) announced on Friday (Jul 26) that it would keep its monetary policy settings unchanged for the fifth consecutive meeting. MAS expects GDP growth for 2024 to be at the higher end of the official forecast range of 2-3%.
The central bank also lowered its full-year forecast for headline inflation, projecting it to fall between 2% and 3%. However, the core inflation forecast, which excludes accommodation and private transport, remains unchanged at 2.5% to 3.5%.
MAS emphasized that current monetary policy settings are deemed appropriate to maintain price stability, with the prevailing rate of appreciation of the Singapore nominal effective exchange rate (S$NEER) policy band providing a restraining effect on both imported inflation and domestic cost pressures.
The central bank foresees Singapore’s economy strengthening throughout 2024, with the slight negative output gap expected to close by year-end. Core inflation is expected to decline more significantly in Q4 2024 and to reach around 2% in 2025.
Despite the more optimistic growth outlook, MAS acknowledged uncertainties such as the timing and pace of monetary policy easing, as well as the potential impact of geopolitical tensions and trade conflicts. The global economy is also facing uncertainties, with MAS noting that external demand could weaken if global interest rates remain higher for longer.
With the softer-than-expected June inflation figures, which saw headline inflation drop to a three-year low of 2.4%, the central bank remains cautious but optimistic about a steady reduction in cost and price pressures in the second half of 2024.
