MAS keeps monetary policy stance after Singapore's Q2 GDP growth beats forecast

SINGAPORE's economy grew at a faster rate than market's expectations in the second quarter, prompting the government to narrow its growth forecast for this year and keep its monetary policy stance.

On Friday, the Ministry of Trade and Industry (MTI) unveiled that Singapore's gross domestic product (GDP) grew 2.9 per cent from a year ago in the second quarter. This was faster than the 2.5 per cent growth in the preceding quarter and also an upward revision from an earlier estimate of 2.5 per cent.

MTI also narrowed its GDP forecast for this year to 2 to 3 per cent, from an earlier estimate of 1 to 3 per cent.

The better outlook also prompted the Monetary Authority of Singapore (MAS) to keep its monetary policy stance, which the central banks said remains appropriate.

"The GDP forecast range for this year has been narrowed to 2-3 per cent, which is within the planning parameters of the MAS's April 2017 monetary policy decision. Accordingly, the monetary policy stance remains as announced in April," MAS deputy managing director Jacqueline Loh told reporters.

The MAS kept its exchange-rate based policy unchanged at its last policy decision in April, saying a "neutral" stance is appropriate for an extended period. The MAS' next policy decision is due in October.

Singapore's manufacturing sector continued its stellar run, posting a robust pace of 8.1 per cent, underpinned by the strong electronics and precision engineering clusters.

The outlook for the global economy has remained stable in recent months, with global growth on track to come in higher in 2017 compared to 2016.

The US economy rebounded in Q2 and growth momentum is expected to be sustained in the second half of 2017. The eurozone economy is expected to remain stable and continue to grow at a modest pace for the rest of 2017. The Chinese economy is expected to ease slightly in H2, following stronger than expected growth in the first half of the year.

But downside risks such as increased protectionism and a quicker than expected monetary policy normalisation remain.

Nonetheless, the potential for these downside risks to have a significant impact on global growth in 2017 has eased compared to three months ago.