Singapore's Downturn Could Be Deeper, Longer Than Previous Recessions, MAS Says

By Ronnie Harui

Singapore's economic downturn caused by the coronavirus pandemic is likely to be deeper and more prolonged than previous recessions, the Monetary Authority of Singapore said Wednesday.

The pace of recovery is expected to moderate in subsequent quarters, as companies and households are restrained by income losses and increased uncertainty, the MAS said. Some areas of the economy, particularly the travel-related and some contact-intensive domestic services, are unlikely to recover to pre-pandemic levels even by the end of 2021, the central bank said in its biannual macroeconomic review report.

"The nature of the Covid-19 shock has rendered this crisis to be deeper and likely more prolonged than past recessions," the MAS said.

The recovery in Singapore's labor market could be uneven and slow, the central bank said. The resident unemployment rate is likely to stay elevated in 2021, keeping wage growth low.

Inflation will only quicken gradually from its trough, the MAS said. For 2021, the headline consumer-price index is expected to be between a 0.5% decline and a 0.5% rise and core CPI is projected to be between 0.0% and a 1.0% increase. For 2020, both headline and core CPI are likely to be between a 0.5% decrease and 0.0%.

Monetary policy will remain accommodative for some time, the MAS reiterated. In October, the central bank maintained the zero slope in the Singapore dollar nominal effective exchange rate policy band and signaled an accommodative monetary policy stance would be appropriate for some time.

"This would support the Singapore economy through the fragile recovery and ensure medium-term price stability," the MAS said.

Write to Ronnie Harui at [e-mail]

(END) Dow Jones Newswires

10-28-20 0015ET