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In opinion of Robert Carnell, chief economist at ING, the Monetary Authority of Singapore (MAS) is bound to ease from the moderate appreciation it currently has in place in October, when it is due to reset the SGD nominal effective exchange rate path and band.

Key Quotes

“Given how long this policy has been in place while the economy has languished, there is an argument for any policy adjustment to err on the aggressive side. It will be another six months before the MAS is due to make a further adjustment, so underdoing it now will only condemn the economy to a longer period of inappropriately tight policy and slow growth.”

“There is also a growing argument for some fiscal stimulus. Singapore’s financial strength is unparalleled, so the real question is where to aim any stimulus. Given the uncertainty surrounding the global environment and business investment, a more effective stimulus than accelerated depreciation or payrolls tax cuts might be through household tax rebates or cuts in public service charges. But either way, some small temporary stimulus can’t do any harm and could help to alleviate some of the strain on the economy whilst conditions remain unfavourable.”