Singapore’s central bank yesterday eased monetary policy as the city-state, seen as a bellwether for the health of global trade, heads for a deep recession due to the coronavirus pandemic.
The easing echoes moves made by other countries and comes after data last week showed the city-state suffered its sharpest contraction in the first quarter since the global financial crisis.
The Monetary Authority of Singapore (MAS), which uses the exchange rate as its main policy tool rather than a benchmark interest rate, recentered its currency band downwards and flattened the slope at which the Singapore dollar is allowed to move against a basket of currencies of its major trading partners to zero — effectively weakening the local unit.
Photo: Bloomberg
The MAS has never before taken those two steps at the same meeting.
All 16 economists in a Bloomberg survey projected the MAS would take that dual action.
“Major uncertainty remains. The recovery in the global economy will depend on the epidemiological course of the pandemic and the efficacy of policy responses,” the MAS said.
It was supposed to issue its next policy statement next month, but brought it forward as the country reels from the economic impact of the virus. Singapore is one of the world’s most open economies, and is usually hit hardest and earliest during any global shock.
GDP shrank by 2.2 percent in the first quarter compared with last year — the worst decline since the 2009 financial crisis, according to advance estimates released last week by the Singaporean Ministry of Trade and Industry.
The ministry downgraded its growth forecast, projecting GDP would fall by up to 4 percent this year.
With global demand hammered by business closures, a halt in air travel and other measures to contain the virus, Singapore’s easing is more to reflect the economic climate than to support exports, CIMB Private Banking economist Song Seng Wun (宋城煥) said.
“You cannot have a strong Singapore dollar when regional economies and the global economy are in deep recession,” he said.
Additional reporting by Bloomberg
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