SINGAPORE'S economy grew by a better-than-expected 4.6 per cent compared to a year ago for the third quarter of 2017, based on advance estimates of gross domestic product (GDP) growth by the Ministry of Trade and Industry (MTI) on Friday morning.
At the same time, the Monetary Authority of Singapore (MAS) is keeping its Singdollar policy unchanged, maintaining the rate of appreciation of the S$NEER policy band at zero per cent, with no change to the width of the policy band and the level at which it is centred.
"Third quarter GDP will likely be the strongest this year. Growth could ease a tad in the coming quarters as the economy shifts from a recovery to a normalisation phase. Moreover, it is only logical to expect growth to moderate against the backdrop of a normalisation in global monetary policies."
"The central bank has also highlighted that growth momentum in 2018 would be slightly slower than this year, which is in line with our expectation, while inflation will remain benign at between zero and one per cent."
"Although GDP growth in the first three quarters is now at a robust 3.3 per cent year on year, nevertheless there was no change to the official 2017 growth forecast of 2-3 per cent year on year, albeit "in the upper half of the 2-3 per cent forecast range", which implies that Q4 2017 growth could slow sharply to around 2.2 per cent year on year.
"The surprise was how dovish the MAS statement read. Basically, MAS sees growth as steady but likely to slow slightly from this year, and more importantly, headline and core inflation outlook is tipped at a modest zero to one per cent and one to 2 per cent year on year in 2018.
"MAS also noted that core inflation is expected to trend towards but average slightly below 2 per cent over the medium term. All these essentially reinforces that there is no need to jump the gun on tightening now, even as it leaves the adjustment window open in 2018.
"Notably, MAS referenced that its stance in the October 2016 MPS (Monetary Policy Statement) was that the neutral policy stance would be appropriate for an extended period, and given the economic outlook at this stage and consistent with medium-term price stability, MAS will maintain the rate of appreciation of the S$NEER policy band at zero percent, with the width of the policy band and the level at which it is centred also unchanged."
"This is the strongest since Q1 2014 (4.9 per cent year on year then). Strength came from manufacturing sector (15.5 per cent year on year). Services grew 2.6 per cent year on year, strongest since Q2 2015 while construction continued to contract for the fifth consecutive quarter (-6.3 per cent year on year). As expected, the MAS kept the neutral S$NEER slope unchanged, with no changes to the midpoint and bandwidth as well."