Mild Inflation, Subdued Wages Seen for Singapore, MAS Projects

  • GDP growth forecast to slow slightly next year: central bank
  • MAS stuck to its neutral policy stance earlier this month

Singaporeans should get used to mild inflation and scant wage gains for at least the next several months, according to the Monetary Authority of Singapore.

A stable outlook for global commodity prices, somewhat subdued consumer sentiment, and lingering labor-market slack will probably hold down inflation pressures, the MAS projected in its twice-yearly review of macroeconomic trends released Friday. Unemployment, too, should remain somewhat stable with the pace of economic growth seen slowing marginally next year.

“The Singapore economy will likely see slightly moderating, albeit more balanced growth, next year,” the MAS said. “The level of output is expected to remain close to potential and over the medium term, core inflation is expected to trend towards, but average slightly below, 2 percent.”

Economists surveyed by Bloomberg still see a 2.5 percent pace of growth for all of 2017, while headline consumer prices are forecast to advance 0.8 percent on a year-over-year pace. The central bank sees growth coming in at the upper half of its 2 percent to 3 percent forecast range this year.

The projections help explain why the central bank held a neutral stance in their Oct. 13 decision, making no change to the width, slope or center of the currency band. The MAS didn’t re-commit to phrasing that its stance would be appropriate for “an extended period,” giving policy makers room to tighten at its April gathering if necessary.

MAS MD Ravi Menon said in an interview this week policy makers need to be proactive if a pickup in growth leads to price pressures. He noted that while core inflation has accelerated, it’s still well below the historical average of just under 2 percent.

Read More: Singapore Needs to Be on Guard If Inflation Climbs, MAS Chief Says

Other highlights of the review included:

  • U.S. economy should “expand at a steady pace, with some upside potential” next year while European growth momentum moderates
  • Singapore’s economy has been helped by sustained growth in the global information-technology industry and solid regional demand for services
  • Further external demand should keep up domestic growth momentum while weakness in oil and construction should fade
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