MAS and MTI reviewing 2015 growth forecast

THE Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) are reviewing the 2015 growth forecast for the economy, taking into account the weaker output in the first half of the year as well as supporting factors in the second half.

MAS managing director Ravi Menon said this on Tuesday at MAS Annual Report 2014/15 media briefing. He said MAS is closely monitoring three key risks in external environment.

The first is Greece, where the situation remains highly uncertain. The second is China, where downside risk has increased. Third, the region where financial conditions could tighten sharply as the US Fed hikes interest rates.

In its annual report, MAS had said Singapore's growth 2-4 per cent is on track.

"The global economy is expected to grow modestly in 2015, underpinned by a firmer expansion in the advanced economies," said MAS.

In the United States, the Federal Reserve is moving closer towards the process of monetary policy normalisation, amid an improving economic outlook. The eurozone economy is seeing gradual improvement, while economic activity in Japan is recovering as the drag from the consumption-tax hike dissipates.

China's growth is likely to continue moderating and the rest of Asia should benefit from improvements in exports and lower oil prices, MAS said.

"Against this backdrop, the Singapore economy is expected to expand at a moderate pace of 2-4 per cent this year, in line with its medium term potential of 3 per cent on average," it said.

MAS also said there is no change to inflation forecasts.

Both CPI-All Items inflation and MAS Core Inflation are expected to be lower in 2015 compared to last year due to lower oil prices. Core inflation excludes accommodation and private car transport.

Headline inflation and core inflation are projected to average -0.5 to 0.5 per cent, and 0.5 to 1.5 per cent respectively.

Mr Menon also said that he expects headline inflation to come in at the lower half of forecast range in 2015, but should pick up in 2016.

He said core inflation is expected to be in the lower half of forecast range.