SINGAPORE, March 30, 2020 (BSS/AFP) – Singapore’s central bank eased
monetary policy Monday 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 said it had flattened the slope of the
band at which the local dollar is allowed to move against a basket of
currencies of its major trading partners — effectively weakening the local
unit.
Instead of using interest rates, trade-reliant Singapore manages monetary
policy by letting the local dollar rise or fall against a currency basket of
its trading partners.
“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 central bank said.
MAS was supposed to issue its next policy statement in April but brought it
forward as the country reels from the economic impact of the virus.
The financial hub is one of the world’s most open economies, and is usually
hit hardest and earliest during any global shock.
Gross domestic product (GDP) shrank by 2.2 percent in the first quarter
compared with the previous year — the worst decline since the 2009 financial
crisis, according to advance estimates released last week by the trade
ministry.
The ministry has downgraded its growth forecast, projecting GDP will fall
by up to four 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 current economic climate than to support exports, said CIMB Private
Banking regional economist Song Seng Wun.
“You cannot have a strong Singapore dollar when regional economies and the
global economy are in deep recession,” he told AFP.