MAS likely to ease monetary policy amidst GDP slowdown

Currency overvaluation and persistent external risks were also cited as factors.

The Monetary Authority of Singapore (MAS) is expected to ease monetary policy at its next meeting, citing slowing growth momentum, currency overvaluation, and persistent external risks, according to an ING analysis.

The bank believes MAS is likely to “reduce the slope of the SGD NEER band to zero,” noting that the case for easing is now stronger than maintaining the current stance.

Although Singapore’s GDP expanded by 4.3% year-on-year in the second quarter, up from 4.1% in the first and well above the official full-year forecast of 0% to 2%, ING sees signs of a slowdown ahead.

“With first-half GDP growth exceeding expectations, there are now clear upside risks to both our full-year 2025 forecast of 1.8% and the official projection range,” the report said. “However, we expect the MAS to pay more attention to the likely fall in GDP growth in the second half of the year,”

The labour market remains solid, with the unemployment rate at 1.9% in May.

But ING flagged weakness in consumer demand: “However, we expect the MAS to pay more attention to the likely fall in GDP growth in the second half of the year,"

At the same time, the Singapore dollar has remained firm.

“The Singapore dollar continued to appreciate against the USD in the second quarter [...] This has pushed currency overvaluation to new highs, even as domestic growth and inflation indicators remain subdued,”

Whilst the electronics and broader manufacturing sectors have been spared from tariffs so far, ING warns that trade policy uncertainty still poses risks: “This has pushed currency overvaluation to new highs, even as domestic growth and inflation indicators remain subdued,”

Despite the strong start to the year, ING maintains that the “MAS has consistently flagged significant downside risks from external factors,” and believes these unresolved uncertainties, along with muted inflation, justify a more accommodative policy shift.

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