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Singapore seen easing monetary policy as economy stumbles: Reuters poll

By Fathin Ungku
File photo of the logo of the Monetary Authority of Singapore at its building in Singapore

By Fathin Ungku

SINGAPORE (Reuters) - Singapore's central bank is expected to ease monetary policy at its semi-annual meeting in October in a bid to boost a trade-reliant economy being choked by the prolonged U.S-China trade war, economists said.

Eleven economists polled by Reuters late last week all expect the Monetary Authority of Singapore (MAS) to loosen policy at a meeting due to take place no later than Oct. 14.

This compared to seven out of 11 economists calling for an easing in a July Reuters poll.

Last week, Singapore reported disappointing manufacturing production figures for August as electronics output plunged, the latest in a slew of weak data that is fueling fears of a recession in the city-state.

"The much worse-than-expected August industrial production outturn increases the conviction in our view that the MAS will ease foreign exchange policy," Nomura said in a note to clients on Thursday.

One of the world's busiest ports, Singapore has been hit hard by the escalating Sino-U.S. trade dispute, which has disrupted global supply chains in a blow to business investment and corporate profits.

Earlier this month, economists sharply cut their forecasts for Singapore's growth in 2019, citing trade tensions and China's slowdown as the top risks to the financial hub.

Analysts also expect expansionary measures on the fiscal side, especially as elections are due to be held within months.

Singapore's finance minister said last week the government would do "what needs to be done" to aid the economy.

The central bank manages monetary policy through exchange rate settings rather than interest rates, letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed policy band.

The MAS can use several tools to change policy but most commonly it will adjust the so-called slope of this band, which determines the pace at which the currency can move.

Singapore's advance estimate for third-quarter GDP growth and MAS semiannual monetary policy statement will be released on the same day in October.

In the second quarter, the economy contracted 3.3% on a seasonally adjusted and annualised quarter-on-quarter basis. From a year earlier, it expanded 0.1%, the slowest pace in a decade.

(Reporting by Fathin Ungku; Editing by Joe Brock & Kim Coghill)