It's not in Singapore's interest to manipulate currency: Heng Swee Keat

Deputy Prime Minister Heng Swee Keat said it will be unsustainable for Singapore to manipulate its exchange rate.
Deputy Prime Minister Heng Swee Keat said it will be unsustainable for Singapore to manipulate its exchange rate.PHOTO: ST FILE

TOKYO - Singapore is not a currency manipulator, visiting Singapore Deputy Prime Minister Heng Swee Keat said on Friday (May 31), in his first comments on the United States placing the country on its currency watch list with eight others, including China and Japan.

"It is not in our short-term nor long-term interests to manipulate the currency," Mr Heng, who is also Finance Minister, said in his reply to The Straits Times.

Speaking to Singapore journalists at the end of a three-day visit to Tokyo, he said the Monetary Authority of Singapore is unique in how it uses the exchange rate as its monetary policy tool, unlike most central banks that use interest rates.

"Many years ago, we have already realised that, being such an open economy where trade is a much bigger percentage of our gross domestic product - today it is three times our GDP - the exchange rate has a far bigger impact on inflation and economic conditions than interest rates," he said.

"Our monetary policy seeks to achieve price stability that is compatible with growth."

Singapore was placed on the watch list for its large current account surplus and net foreign currency purchases of at least US$17 billion (S$23.4 billion) last year, or 4.6 per cent of the GDP, which is more than double the US threshold.

The US said it will monitor countries on the list to see if they are purposely devaluing their currencies to gain a trade advantage.

Mr Heng said it will be unsustainable for Singapore to manipulate its exchange rate.

 
 
 

Holding it deliberately low will cause hyperinflation, while keeping it artificially high will result in severe deflation, he added.

Singapore does not use exchange rate to achieve an advantage, he said, because "you may get a short-term boost, but you will end up with longer-term problems".

"The economy goes through cycles, and changes in exchange rates and fiscal policy help us to dampen the amplitude of those cycles," he said.

Given Singapore's ageing population, Mr Heng also stressed the need for structural policy changes, through the industry transformation maps, to protect long-term growth.

He said: "If we manipulate our exchange rate for some short-term gains, we will set ourselves further behind."