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Posted August 27, 2025 at 12:49 pm
Recent economic results point to the increased likelihood of Singapore loosening financial conditions as annualized inflation figures fall precipitously. The Monetary Authority of Singapore (MAS) maintains a target for core cost pressures of marginally under 2%, but the corresponding Consumer Price Index expanded just 0.5% year over year (y/y) in July, while the overall CPI climbed only 0.6%. Both arrived below estimates by a tenth of a percent and compare to rates of 0.6% and 0.8% in June.
The pace of GDP advancement could accelerate meaningfully and produce significant outperformance for the island-nation relative to its neighbors in Southeast Asia with the help of monetary policy accommodation. One thing that’s working well for the city-state is that its exports to the US only face a 10% tariff, which is well below the 15% average. And despite global trade uncertainty persisting, July’s manufacturing numbers were terrific. The country’s industrial production jumped 8.2% m/m and 7.1% y/y, easily surpassing the economist consensus expectation for a 1.1% m/m gain. The monthly climb was the sharpest in 12 months, illustrating reaccelerating economic conditions following a weak first quarter GDP print of -0.4% quarter over quarter, although the second quarter was much better at 1.4% and I perceive that the third will be the strongest so far in 2025 at around 1.7%.
The MAS adjusts its monetary position by changing the Dollar Nominal Effective Exchange Rate (S$NEER), which is an allowed range for its currency to trade against a basket of tenders issued by its major cross-border commerce partners. Having eased for the second time this year in April, further accommodation at the organization’s October macroeconomic review is likely due to the recent CPI results. The economy is already growing strongly in the short-term and a looser stance by its central bank via a reduced slope to its policy band will provide a boost to performance, enabling the territory to soar past the Ministry of Trade & Industry’s 2025 GDP growth forecast of 1.5%-2.5%.
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