Singapore's monetary authority has tightened its grip on easing monetary policy for the second consecutive quarter as the first-quarter economic growth rate fell short of expectations. The Monetary Authority of Singapore (MAS) announced on the 14th that the preliminary estimate for first-quarter gross domestic product (GDP) growth was 3.8%. This figure falls below the 4.3% forecast by experts polled by Reuters and is also lower than the 5% growth recorded in the previous quarter of 2024.
In response, the MAS announced a further reduction in the slope of the appreciation band of the Singapore dollar nominal effective exchange rate (S$NEER) policy band. The MAS had already implemented its first monetary policy easing since 2020 at its meeting in January. In a statement, the MAS emphasized that it would "continue with a gradual and modest appreciation path of the S$NEER policy band."
The S$NEER is a monetary policy tool used by Singapore to manage the value of the Singapore dollar against a trade-weighted basket of currencies of its major trading partners. The MAS controls inflation and supports economic growth by adjusting the slope and width of this policy band. While the specific levels of the policy band are not disclosed, the market gauges the policy direction through MAS announcements and market interventions.
Annual GDP Growth Forecast Lowered to 0-2%... "Inevitable Impact of US Tariffs"
On the same day, Singapore's Ministry of Trade and Industry revised its 2025 annual GDP growth forecast downward from the previous 1-3% to 0-2%. The MAS also echoed this pessimistic outlook, presenting its own economic growth forecast for the year at 0-2%.
Earlier this month, Singapore's Prime Minister Lee Hsien Loong stated in a statement regarding the impact of US tariffs on the Singaporean economy that "there is no doubt that Singapore's growth will be significantly affected." He also indicated uncertainty, saying, "Singapore may or may not fall into a recession this year."
Outlook for Easing Inflationary Pressure... Core Inflation Target Also Lowered
Meanwhile, the MAS significantly lowered its forecast for overall inflation in 2025 from the previous 1.5-2.5% to 0.5-1.5%. The core inflation forecast, which excludes accommodation and private transport costs, was also revised downward from the 1-2% presented after the January meeting to 0.5-1.5%, indicating an expectation of easing inflationary pressures.
This latest monetary policy easing is interpreted as a preemptive response to weaker-than-expected economic growth and increasing external uncertainties such as the global economic slowdown and the escalating US-China trade tensions. However, some observers are raising concerns that further monetary easing could weaken the Singapore dollar, leading to higher import prices and consequently increasing inflationary pressures. The challenges facing the Singaporean economy and the delicate policy management by the monetary authorities will be closely watched in the future.
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