Few bright spots for Singapore economy, says MAS in its biannual review

The Singapore Central Business District, with the Singapore Flyer in the foreground.
The Singapore Central Business District, with the Singapore Flyer in the foreground. ST PHOTO: ALPHONSUS CHERN

SINGAPORE - The Singapore economy is facing uncertain short-term growth prospects as the outlook for its key trading partners remains cloudy, the Monetary Authority of Singapore (MAS) said in its biannual macroeconomic review out on Tuesday.

Despite the lacklustre outlook, however, the central bank said its latest monetary policy decision - to slightly reduce the Singdollar's rate of appreciation - was appropriate and a more drastic move would have been unwarranted.

The review documents the MAS' analysis and assessment of macroeconomic developments affecting the Singapore economy.

The central bank noted that the United States economy is recovering but Singapore may not be able to capitalise fully on this. At the same time, the growth outlook in Asia has dimmed, though the growing importance of Asean economies like Vietnam and Cambodia offers some longer term optimism.

While the US has been showing some signs of recovery, its growth has been largely consumption-driven, and mainly met by domestic supply, the MAS said.

This means any boost to Singapore from a resurgent US economy could be more muted than before.

In Asia, slowing growth in Singapore's major regional trading partners - China, Indonesia and Malaysia - will drag down growth, the MAS said. These three economies account for a third of Singapore's goods exports and are also significant sources of demand for services such as tourism.

In the longer term, however, Singapore's Asean neighbours such as Vietnam and Cambodia are expected to become more deeply integrated into global supply chains.

This should confer benefits to Singapore's domestic exporters and wholesalers, the MAS noted.

The boost to incomes in these economies will also raise the purchasing power of households, "which bodes well for Singapore re-exporters plugged into the consumption goods space".