Singapore seen easing monetary policy as tariffs threaten growth

[SINGAPORE] Singapore is expected to further ease monetary policy at next week’s review, following a move in January, as US tariffs against its trading partners cast a shadow over the outlook for the export-reliant city-state.

The central bank manages monetary policy by targeting the Singapore dollar nominal effective exchange rate, known as the S$NEER, rather than interest rates. It adjusts policy via three levers: the slope, mid-point and width of the policy band.

Nine out of 10 analysts polled by Reuters expect the Monetary Authority of Singapore to loosen policy at its April 14 review by reducing the slope of the band in which it allows the S$NEER to trade.

Lee Yen Nee, risk analyst at Fitch Solutions unit BMI, expects the MAS to ease policy given the mounting risks to growth, including the imposition of tariffs by US President Donald Trump.

“The latest tariff announcement by the US raises the risk of a global recession, which would be very negative for the Singapore economy given how trade-dependent it is,” said Lee, estimating that tariffs could knock around 1 percentage point off Singapore’s economic growth.

Trade minister Gan Kim Yong has said Singapore was reviewing its economic forecasts because of the tariffs. Currently, GDP is forecast to grow between 1 per cent and 3 per cent in 2025, after growth of 4.4 per cent last year.

BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign Up

Sign Up

Maybank economists have cut their forecast for Singapore’s GDP growth this year to 2.1 per cent from 2.6 per cent.

HSBC economists also expect MAS to reduce the slope of the S$NEER, noting that inflation has undershot the central bank’s forecast range of 1 per cent to 2 per cent so far this year.

Core inflation fell to 0.6 per cent in February, the lowest in nearly four years.

The outlier of those polled was RHB group chief economist Barnabas Gan, who expects the MAS to hold monetary policy.

He was reluctant to downgrade his growth forecast of about 2.8 per cent, as growth still appeared to “be quite resilient”.

“We are still drawing hope that there may be some easing of tariff risks,” he said, noting that at 10 per cent Singapore had the lowest US tariff rate across South-east Asia.

Gan said there could be an easing in the second half of the year. REUTERS