230 views

Tighter budget seen in SG to address inflation pressures

Singapore maintains tight monetary policy amidst peak inflation rate.

Singapore's commitment to a tight monetary policy has emerged as a strategy for maintaining economic stability, following its peak inflation rate of 7.5 percent in 2022, which subsequently decreased to 3.7 percent by December of the same year. 

Dr. Kevin Cheng, Lead Economist at AMRO, said that the relatively tight monetary policy has been very helpful in managing elevated inflation that Singapore faced in the past two years.

He highlighted the crucial role of the Singapore dollar nominal effective exchange rate's appreciation in this context. However, with inflation expected to remain elevated in the near term, maintaining the current monetary policy stance is deemed beneficial for ensuring price stability going forward.

Cheng added that Singapore's economy is known for its resilience and capacity to adjust its economic policies in response to unexpected challenges. 

He elaborated on the contingency plans and criteria for adjusting economic strategies, mentioning that, "Inflation turns out to be higher than expected, the authorities have a number of policy instruments ranging from recalibration of the exchange rate band to non-monetary policy measures that have an impact on prices." 

He also noted Singapore's readiness to manage sudden capital outflows, bolstered by the country's substantial foreign reserves and the strong capitalisation of Singapore banks.

The government's approach to balancing tight monetary policy with fiscal interventions was also discussed. Fiscal policy, targeted mainly at price stability, can counteract tight monetary policy through fiscal instruments such as cash payouts and wage subsidies to ensure stable economic growth while minimising the impact of economic shocks on vulnerable groups.

When asked about Singapore potentially overtaking Hong Kong as an International Financial Centre (IFC), Cheng views Singapore and Hong Kong as complementary rather than direct competitors. He pointed out the rapid expansion of Singapore's financial sector, particularly in wealth management. 

However, he emphasised the capacity constraints Singapore faces, such as rising property prices and rents. "Singapore and Hong Kong are water complimentary, and they can work hand in hand to make Asia a better place," Cheng stated, highlighting the different strengths and regional focuses of the two cities.

Follow the link for more news on

Join Singapore Business Review community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!