Singapore forecasts deflation, contraction in 2020

This photograph taken on February 18, 2020 shows people buying vegetables at a market in Singapore. Singapore’s central bank eased monetary policy on March
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Updated 31 March 2020

Singapore forecasts deflation, contraction in 2020

  • Central bank eases monetary policy as virus heralds deep recession

SINGAPORE: Singapore’s central bank aggressively eased monetary policy on Monday as the bellwether economy braced for deflation and a deep recession this year due to the coronavirus pandemic.

The Southeast Asian nation is among the world’s most open economies and seen as a gauge of the health of the global trade. Last week, it posted a sharp decline in first quarter gross domestic product and slashed growth projections.
The Monetary Authority of Singapore (MAS) manages policy through exchange rate settings, rather than interest rates, letting the local dollar rise or fall against currencies of its main trading partners within an undisclosed band.
The widely-expected easing on Monday was the most aggressive since the 2009 financial crisis, flattening the band’s rate of increase and effectively shifting its center lower. It also comes only days after the government unveiled a large fiscal package to soften the outbreak’s hit to the economy.
While the MAS move follows drastic steps by other central banks, it was still not as bold as some in the market had expected, which pushed the local currency up slightly.
“We have heard the government talk about the downturn in pretty dire terms, so there was no mistaking that pretty aggressive easing would be required,” Barclays’ economist Brian Tan said, adding he had been expecting a bigger move.
The MAS adjusts its policy via three levers: the slope, mid-point and width of its Singapore policy band, known as the Nominal Effective Exchange Rate, or S$NEER.
The central bank on Monday said it would adopt a zero percent annual appreciation rate for its policy band, starting at the S$NEER’s prevailing level, which is currently just below the band’s mid-point.
Analysts said this amounted to a downwards adjustment of the first two settings, the slope and mid-point, but left the width unchanged.
All nine economists in a Reuters survey this month expected the central bank to ease as policymakers worldwide step up efforts to limit the economic damage from the fast spreading virus.
Most global central banks, including the US Federal Reserve, have cut interest rates to cushion the hit to businesses from the outbreak, while many have also resorted to printing money to prevent their economies from slipping into recession.


The Monetary Authority of Singapore manages policy through exchange rate settings, rather than interest rates, letting the local dollar rise or fall against currencies of its main trading partners within an undisclosed band.

The Southeast Asian shipping, travel and finance hub is bracing for the worst recession in its 55-year history and last week lowered its 2020 GDP forecast range to -4 percent to -1 percent after a sharp contraction in the first quarter.
While Singapore’s early successful efforts to contain the coronavirus won it praise globally, a recent jump in infections to over 800 has raised some concerns about the local spread.
The central bank on Monday also lowered its official outlook for headline and core inflation to -1% to zero percent for 2020.
The MAS said its new policy settings provided “stability” to the exchange rate but added fiscal policy will be the main tool to mitigate the economic impact of the pandemic.
The city-state has spent billions in virus-related relief for businesses and households already this year, equivalent to almost 11 percent of its GDP.
Capital Economics said the move highlighted the limits of central bank policy in weathering the downturn and that further loosening of monetary settings was unlikely in the months ahead.
But others said the central bank still had room to ease when it next meets in October, if not before.
“The overall focus has been to emphasize a message of stability in the Singapore dollar,” said Moh Siong Sim, currency analyst at the Bank of Singapore.
“In the past, wherever there’s such a move, it’s taken as a prelude to a series of easings, but I think this time around the focus is more on the fiscal policy to cushion the blow and the exchange rate is more to release the pressure somewhat.”
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Greece readies revival of coronavirus-hit economy

Updated 04 June 2020

Greece readies revival of coronavirus-hit economy

  • Tourism accounts for around 20 percent of Greek gross domestic product
  • Greece desperately needs to attract visitors this year

ATHENS: Greece geared up Thursday to revive its tourism-dependent economy, which shrank in the first quarter owing to measures against the coronavirus, the Elstat data agency said.
Prime Minister Kyriakos Mitsotakis is to headline an event later in the day to unveil a national tourism campaign for the virus-shortened season.
He has already warned the country that the economy would fall into a “deep recession” this year before rebounding in 2021.
Tourism accounts for around 20 percent of Greek gross domestic product (GDP), so it is crucial that visitors be attracted back to the nation’s beaches and iconic island villages.
Toward that end, Greece has announced a ‘bridge phase’ between June 15 and 30, during which airports in Athens and Thessaloniki will receive regular passenger flights.
Other regional and island airports are to open on July 1.
Greece plans to impose a seven- to 14-day quarantine only on travelers from only the hardest-hit areas as identified by the European Union Aviation Safety Agency (EASA).
Sample tests will also be carried out at entry points for epidemiological purposes however.
Provisional data released by Elstat showed how important it is to get the tourism sector back on its feet.
GDP fell by 1.6 percent in the first quarter of 2020 compared with the previous three months, and by 0.9 percent year-on-year, the data showed.
But data for March alone showed that month was not as bad as expected, government spokesman Stelios Petsas told a press conference.
Now, “Greece is opening its gates to the world under safe conditions for tourism workers, for residents of tourism destinations and of course, for our visitors,” he said.
With fewer than 180 coronavirus deaths among 11 million residents, Greece seeks to market itself as a healthy holiday destination.
On Tuesday, Athens said it was suspending flights to and from Qatar until June 15 after 12 people on a flight from Doha tested positive for COVID-19.
Earlier Thursday, Greek media reported that a first batch of nearly 190 tests among residents of the Cycladic islands, one of Greece’s most popular destinations, had turned up negative.
The country desperately needs to attract visitors this year.
The latest finance ministry estimate suggests that for 2020 as a whole, business activity could drop by up to 13 percent from the level in 2019.
Between 2009 and 2018, Greece suffered its worst economic crisis in modern times, and had begun to slowly regain some of the lost ground before it was hit by the impact of coronavirus restrictions.
The country was shut down for six weeks, and the International Monetary Fund forecast in May that GDP would decline by 10 percent this year before growing by 5.5 percent in 2021.