The jurisdiction is trying to bolster economic performance following downward revisions to growth forecasts.

Measures introduced in the latest Finance Bill 2016 to offer tax relief on Peer To Peer (P2P) loans are a welcomed move that could give individual investors higher returns on their savings, say London Chartered Accountants Blick Rothenberg LLP.

Singapore’s central bank took markets by surprise in loosening monetary policy yesterday, prompted by expectations that the Asian city-state, one of the world’s major wealth management hubs, is likely to grow more slowly than previously expected this year, affected by slowing global growth.

The Monetary Authority of Singapore said its policy was not designed to weaken the exchange rate of the Singapore dollar. Rather, it followed the “measured steps the MAS has taken to reduce the rate of appreciation of the policy band in October and 2015 respectively”.

Yesterday, the Singapore dollar fell 0.9 per cent against the US dollar, the largest fall since November. 

The jurisdiction has felt a chill from deceleration of growth in China and parts of Southeast Asia. Previous curbs on forms of leverage, designed to prevent its property market from overheating in the past, also have had an impact.  

The move is another example of central banks, such as those in Denmark, Japan, Switzerland, the UK and European Central Bank, adopting ultra-loose monetary policy in a bid to revive growth, although debate remains on how far such money-printing can work.

“The Singapore economy is projected to expand at a more modest pace in 2016 than envisaged in the October policy review. MAS Core Inflation should also pick up more gradually over the course of 2016 than previously anticipated, and is now likely to fall below 2% on average over the medium term,” the MAS said in a statement. 

The central bank set the appreciation rate of its Singapore dollar nominal effective exchange rate, or S$NEER, at zero percent, taking effect from yesterday.

“Compared to expectations in October 2015, the Singapore economy is now projected to expand at a more modest pace this year, against the backdrop of a less favourable external environment. MAS core Inflation is likely to pick up gradually over 2016 as the disinflationary effects of budgetary and other one-off measures fade. However, the increase in core inflation will be milder than earlier expected, on account of a downward revision in the outlook for global oil prices, a reduction in labour market tightness, and weaker consumer sentiment. CPI-All Items inflation will remain negative throughout 2016. Over the medium term, core inflation is expected to average slightly below 2 per cent,” it continued.

According to the Advance Estimates released by the Ministry of Trade and Industry yesterday, the MAS said, the Singapore economy was flat on a quarter-on-quarter seasonally adjusted annualised basis in Q1 2016, following the 6.2 per cent expansion in Q4 2015. While output in the manufacturing sector increased after six quarters of contraction, this largely reflected a temporary ramp-up in pharmaceutical production in January. 

“The outlook for the global economy has dimmed since October. The pace of expansion in the US economy is expected to be more modest than earlier anticipated on account of weakening investment and exports, even as the strengthening labour market continues to underpin private consumption. In the Eurozone and Japan, economic activity will be dampened by their appreciating currencies and weak external demand, notwithstanding recent efforts to boost growth through more accommodative monetary policy. China’s growth momentum is likely to moderate, as its services sector expansion is unlikely to be sufficiently strong to offset faltering industrial activity, amid supply gluts and weak global demand. The slower pace of growth in the G3 and China will in turn weigh on trade-related activity in the rest of Asia,” it said.