Singapore’s central bank tightened monetary policy on Thursday for the first time since 2018, as officials announced the wealthy city-state’s economy grew by 6.5 per cent year-on-year in the third-quarter.
The tightening is to “ensure price stability over the medium term while recognizing the risks to the economic recovery,” according to the Monetary Authority of Singapore (MAS).
Economists said the move was unexpected. “Most analysts, including ourselves, had expected the MAS to stand pat,” said Alex Holmes of Capital Economics.
The MAS, the de facto central bank, manages monetary policy through the exchange rate of the Singapore dollar rather than through the more conventional interest rate method, as the country’s economy depends heavily on overseas trade and is one of the world’s leading destinations for foreign investment.
The monetary policy alteration came as the Trade and Industry Ministry said in its advance estimates that gross domestic product (GDP) grew by 6.5 per cent in the third quarter compared to same period last year, when Singapore was reopening domestically after its sole coronavirus pandemic lockdown.
However growth was a sluggish 0.8 per cent when measured against this year’s March-June quarter, when a contraction of 1.4 per cent was recorded.
Although Singapore’s Health Ministry had been registering record pandemic-related deaths and case numbers in recent weeks, the MAS said it nonetheless expects annual GDP growth of between 6 to 7 per cent for the year, on the back of “strengthening external demand and recovering domestic expenditure.”