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03 March 2024

Patchy recovery delays strict Singapore policy

By Reuters

Singapore's recovery from its worst recession faltered in the fourth quarter, leading some economists to suggest the central bank may hold back from tightening monetary policy until later in the year.

Markets had so far expected the central bank to shift towards tighter policy at its next review in April, by allowing its currency to strengthen gradually. Some economists now believe there will be no change until the following meeting in October.

"The numbers are still patchy, which is a reminder to policymakers that it is not going to be plain sailing," said Song Seng Wun, an economist at CIMB in Singapore. "Monetary policy may still have to be maintained until we see signs of a stronger pickup."

The economy shrank 6.8 per cent on a seasonally adjusted and annualised basis in the fourth quarter, reflecting weaker manufacturing.

The contraction was much bigger than the 0.8 per cent drop analysts had forecast in a Reuters poll.

The Singapore dollar, the central bank's main policy tool which it manages against a secret trade-weighted basket of currencies, stood at 1.4023/33 per US dollar, little changed from levels of 1.4020/50 before the data.

The trade-dependent economy leapt out of its deepest recession in the second quarter last year.

It grew an annualised 14.9 per cent in the third quarter, before the fourth quarter reversal driven by a plunge in drugs production.


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