Singapore | Resilient growth prompts an early start to tightening

In a surprise move, the Monetary Authority of Singapore today tightened monetary policy by slightly raising the slope of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) policy band. A faster-than-expected increase in core CPI and robust Q3 GDP outcome likely prompted the policy shift.What you will learn:

• We now forecast the slope of the policy band will rise another 1% in 2022 and the SGD will appreciate 3% against the USD next year.
• However, we do not expect the earlier policy tightening will derail the growth recovery and have raised our 2021 growth forecast by 0.2ppts to 6.6%.
• While we expect the output gap to close slightly later than the MAS estimates, we agree that growth dynamics are improving, especially given the resilience of the services sector despite continuing restrictions.