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MAS says it does not manipulate Singapore dollar for export advantage

MAS said Singapore's monetary policy framework has always been aimed at ensuring medium-term price stability.

IN RESPONSE to the US Treasury report that put Singapore on its watch list for exchange rate and macroeconomic policies, the Monetary Authority of Singapore (MAS) said on Wednesday that it does not manipulate its currency for export advantage.

"MAS does not and cannot use the exchange rate to gain an export advantage or achieve a current account surplus. A deliberate weakening of the Singapore dollar would cause inflation to spike and compromise MAS’ price stability objective," said the central bank in a media statement.

MAS said Singapore's monetary policy framework has always been aimed at ensuring medium-term price stability.

MAS manages the Singapore dollar nominal effective exchange rate (S$NEER) within a policy band, which MAS pointed out is "just as other central banks conduct monetary policy by targeting interest rates".

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The US Treasury's report on Wednesday said Singapore’s monetary policy is "uncommon".

The response from MAS comes as the US Treasury report published estimates showing that in 2018 Singapore made net foreign exchange purchases of at least US$17 billion, which is equivalent to 4.6 per cent of gross GDP (gross domestic product). 

Singapore runs one of the largest current account surpluses in the world as a share of GDP at 17.9 per cent in 2018, the US Treasury said in its report. "Notwithstanding this large external surplus with the rest of the world, Singapore has consistently run a bilateral goods trade deficit with the United States, which in 2018 totalled US$6 billion."

MAS said that Singapore’s current account balance should be viewed "in context".

In its early years of development, Singapore ran persistently large current account deficits averaging close to 10 per cent of GDP between 1965-84, when its investment needs were greater than available saving, MAS said.

As the economy matured, its investment needs tapered off, while national saving rose. Consequently, the current account turned into a surplus position, said the central bank.

"MAS assesses that together with rising affluence that will raise consumption, Singapore’s current account surplus will be reduced when public and private savings are drawn down for the needs of an ageing population."

MAS had announced in May that it would begin publicly disclosing more data in 2020, a development that the US Treasury said in its report that it "welcomes".