Singapore: Downbeat growth assessment – Standard Chartered

Analysts at Standard Chartered notes that Singapore’s final Q2 GDP print expanded by 0.1% y/y (-3.3% q/q SAAR), broadly unchanged from the advance print of 0.1% y/y (-3.4% q/q SAAR).

Key Quotes

“H1-2019 growth was only 0.6% y/y. The Ministry of Trade and Industry (MTI) has lowered the 2019 GDP growth forecast to 0-1% from 1.5-2.5%, given the poor growth outcome so far. The MTI noted that growth is “expected to come in at around the mid-point of the forecast range.” At 0.5%, 2019 growth may be the slowest since 2009. In addition, Enterprise Singapore downgraded its non-oil domestic exports (NODX) outlook for 2019 to -9 to -8% from -2 to 0%. NODX fell 10.7% in 6M-2019.”

“We are currently calling for the Monetary Authority of Singapore (MAS) to ease its monetary policy in October (On the Ground, 2 August 2019, ‘Singapore – Joining the dovish wave’). According to media reports, the MAS is not considering an off-cycle policy meeting, which is in line with our expectations. Our current call is for the MAS to lower the Singapore dollar nominal effective exchange rate (SGD NEER) band slope slightly by 50bps to +0.5% per annum in October.”

“We do not expect the MAS to adjust the centre or width of the SGD NEER policy band. We expect core inflation to remain within the MAS’ forecast range of 1-2% for 2019. But if the MAS projects 2020 core inflation at 0.5-1.5% in the October monetary policy statement, this would increase the risk of the MAS shifting the SGD NEER policy band slope to flat in 2020.”