Ravi Menon

A recovery, albeit a slow one, is on the horizon for Singapore’s economy as the decline in trade and manufacturing this year has not spread to other sectors, said Monetary Authority of Singapore (MAS) Managing Director Ravi Menon.
Bloomberg reported Menon as saying on Thu (24 Oct) in an interview that MAS holds the baseline view that “the current cycle should be bottoming out toward the end of the year and into next year”.
The predicted recovery, which he said will not be “robust”, rests upon the assumption that the the decline in trade and manufacturing this year will not similarly affect other sectors.
“That doesn’t mean it cannot spill over into other parts of the economy — it could very well do so.
“That is a risk that we’re seriously taking into account. But as of now, there are no signs of that,” Menon said.
According to a Credit Suisse report in Aug, while electronics manufacturing contributed to 80 per cent of the growth in value-add in the sector in 2017 and 2018, Singapore’s manufacturing sector may still take a hit, as its growth is predicted to “reverse sharply” in the second half of this year.
“Our more conservative forecast is driven by our cautious view on the manufacturing sector, where we expect a decline of 3.2% YoY led by contraction in the electronics cluster. This is unlikely to be offset by the construction and services sectors,” said Credit Suisse in its report.
Even strong growth in other industries such as information and communications may not be sufficient to offset the decline in manufacturing and retail trade, as the sector only makes up 4 per cent of Singapore’s GDP, Credit Suisse predicted.
MAS’ forecast of Singapore’s economic growth hovers somewhere in the middle of an official 0 per cent to 1 per cent range this year, before possibly seeing a modest improvement next year, Menon told Bloomberg.
Better balance between govt spending and monetary stimulus should exist: MAS chief Ravi Menon
MAS as a central bank utilises the exchange rate as its main policy tool. On 14 Oct, it “slightly reduced the slope of its currency band” as one of the ways to boost Singapore’s economy in the meantime.
Unlike other central banks, which have to resort to “unconventional policy tools like negative interest rates and quantitative easing”, MAS is not constrained by the zero interest rate level due to its exchange rate policy, said Menon.
The MAS has a “fair amount of policy space on the monetary front without having to think about QE,” he said, adding that it is possible for the central bank to “bring the exchange-rate path to zero as we have done before” if conditions necessitate doing so.
“We have never before had a policy of deliberately depreciating the currency, but we can always recenter the band downward,” Menon said.
Menon also pointed out that global central banks are being met with “unrealistic expectations” to pull their respective countries’ economies out of every slump.
Echoing the sentiments of several global finance chiefs at last week’s International Monetary Fund annual meeting in Washington, Menon said: “It can’t be that every slowdown, every risk or threat on the horizon has to be addressed by a loosening of monetary policy.”
Instead, he posited that fiscal policy plays a stronger role in getting a country’s economy out of a downturn.

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