Singapore GDP growth to ease in Q3, keeps MAS in delicate balancing act: Reuters poll

SINGAPORE, Oct 12 (Reuters) – Singapore’s financial system is predicted to have expanded at a slower tempo within the third quarter, underlining the central financial institution’s problem because it balances the urgency of tackling inflation with out triggering a steep recession by over-tightening coverage.

Advance information on Friday is predicted to indicate gross home product (GDP) expanded 3.4% in July-September from a 12 months in the past, in response to the median forecast of 19 economists in a Reuters ballot.

The manufacturing trade, the Asian monetary hub’s primary development engine, has underperformed resulting from slowing world financial exercise, although the providers sector outlook has improved after the elimination of most COVID-19 curbs and the return of worldwide conferences and occasions up to now month.

The town-state’s financial system expanded 4.4% year-on-year within the second quarter this 12 months, although it had contracted 0.2% on a quarter-on-quarter seasonally adjusted foundation.

That raises the chance of a technical recession, broadly outlined as two consecutive quarters of quarter-on-quarter contractions.

Maybank economist Chua Hak Bin mentioned there’s a “rising threat of a technical recession”, and added that he is not anticipating the central financial institution to tighten financial coverage aggressively given the expansion issues.

The Singapore authorities had downgrade its 2022 GDP development forecast vary to three% to 4% from 3% to five% in August, citing the weakening exterior demand outlook.

As with many different international locations, stubbornly excessive inflation stays the important thing threat this 12 months. The Worldwide Financial Fund on Tuesday warned of recession dangers for a 3rd of the worldwide financial system.

Economists are watching to see whether or not Singapore’s official inflation forecast could be revised when the central financial institution releases its financial coverage assertion, which can be due on Friday.

Analysts expect the Singapore labour market to stay tight, and costs to proceed climbing.

Sixteen economists forecast the Financial Authority of Singapore (MAS) to tighten its coverage, however are divided on how aggressive it will likely be and which of its settings will change.

As a substitute of rates of interest, the MAS manages coverage by letting the native greenback rise or fall towards currencies of its primary buying and selling companions inside an undisclosed band, often known as the Singapore greenback Nominal Efficient Change Fee, or S$NEER.

It adjusts its coverage by way of three levers: the slope, mid-point and width of the coverage band.

Economists, together with Maybank’s Chua, who anticipate MAS to tighten solely by way of one lever largely cited the weak development outlook.

The MAS has tightened financial coverage 4 occasions in a row, with the newest in July in an out-of-cycle transfer.

Reporting by Chen Lin in Singapore; Polling by Veronica Khongwir and Anant Chandak;
Modifying by Shri Navaratnam

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