Central Bank Acts to Counter Economic Slowdown

In response to declining global demand and rising trade tensions brought on by US tariffs, Singapore’s central bank loosened monetary policy on April 14 for the second time this year. The action is intended to lessen the economic impact as the city-state’s small and medium-sized businesses (SMEs), particularly those in industries that rely heavily on exports, deal with growing uncertainty.

MAS Adjusts Exchange Rate Policy

The nominal effective exchange rate (S$NEER) of the Singapore dollar (SGD), a calibrated instrument used in place of interest rates to control inflation and growth, would appreciate more slowly, according to a statement released by the Monetary Authority of Singapore (MAS). Analysts at UOB have lowered the policy band’s slope, which was earlier reduced to 1% in January, to an expected 0.5% annually. The policy band’s width and centre don’t vary.

This offers companies a type of monetary easing intended to increase export competitiveness by reducing the growth of the Singapore dollar relative to a basket of currencies, especially in industries like electronics manufacturing, logistics, and wholesale trade. A moderate appreciation can promote export demand because a stronger SGD raises the cost of Singaporean goods and services abroad. This is particularly important today because global trade flows are being disrupted by US President Donald Trump’s 10% blanket tariff on all imports and heavier penalties on specific nations.

Economic Stress Signals Emerge

Given its high exposure to international supply chains and trade, Singapore’s economy is already beginning to feel the effects of stress. In Q1 2025, seasonally adjusted GDP decreased by 0.8%, driven by a 2.3% decline in construction and a 4.9% quarter-over-quarter decline in manufacturing. In response, Singapore’s full-year GDP growth prediction was reduced from 1%-3% to merely 0%-2% by the Ministry of Trade and Industry (MTI). With Citibank predicting a “mild three-quarter recession” beginning in Q3 2025, the revision puts Singapore perilously near a technical recession, which is defined as two consecutive quarters of negative growth.

The MAS ruling shows that decision-makers are prepared to move swiftly to maintain Singapore’s business-friendly atmosphere. However, it also highlights the dangers for companies that rely on regional and international commerce since tariff shocks may cause customers in China, the US, and the EU to reduce their orders or postpone contracts.

The Singapore dollar rose 0.2% to 1.3165 vs the US dollar in a mild reaction to the policy announcement. In 2025, the currency is down 5.6% versus the Japanese yen and 5.5% versus the euro, notwithstanding this rise. The lower SGD could raise costs for companies that source items from Europe or Japan, finance charges like tuition abroad, or open branches in those countries. On the other hand, importers of commodities from these nations may benefit from its strengthening versus regional currencies, which includes a 1.1% increase against the British pound and a 2% gain against the Malaysian ringgit.

MAS Issues Trade Warning

MAS has not ruled out additional easing. Assume that either GDP declines in Q2 or core inflation keeps declining. Analysts anticipate that MAS will then recenter the policy range downward or lower the S $ NEER slope to zero, thus permitting the currency to depreciate. The last time such a dramatic measure was taken to protect the economy from recession was in March 2020, during the height of the COVID-19 pandemic.

The MAS emphasized that “a more abrupt or persistent weakening in global trade will have significant ramifications on Singapore’s trade-related sectors, and, in turn, the broader economy.” In other words, Singapore remains one of the most efficient and well-managed business hubs globally, but resilience and careful planning will be critical in navigating the global storm ahead.

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