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Economists at ANZ Bank expect monetary policy in Singapore to stay accommodative for a prolonged period but don’t expect the MAS to ease policy further. The SGD is set to continue to appreciate to 1.32 by the end of 2021, on the improved economic outlook and general dollar weakness.

Key quotes

“We forecast real GDP growth of 6.3% for 2021, coming off -5.8% growth in 2020. The level of real GDP will reach pre-pandemic levels towards the end of 2021.”

“The improved economic outlook will see tax revenue collections increase. This will lead to a substantial improvement in the fiscal balance in FY2021, though we expect it to remain in deficit. Inflation will increase in 2021 largely due to base effects. But labour market slack mean inflation pressures will remain benign for some time. We expect the MAS to maintain an accommodative policy stance for some time. Further easing will only be considered if the economy faces a renewed downturn.”

“We forecast USD/SGD to be at 1.32 by the end of 2021. The pace of appreciation will be faster if the MAS pares their intervention activity.”