Conditions in the global economy were generally favourable, supported by growth in the US economy and the pick-up in activity in Europe and Japan. The Asian economies, led by China and India, performed well. So too did Singapore, which has now seen five consecutive years of expansion. Real GDP grew by 7.9% in 2006. The broad based expansion in the non-electronics manufacturing and services industries more than offset the drag from the global-led slowdown in the domestic electronics sector. CPI inflation remained well-contained at 1% despite the strong growth and higher energy-related costs. The unemployment rate declined to 2.7% as a record 176,000 jobs were created, 62,700 more than in the preceding year.

In the financial sector, the asset management industry continued its strong growth. We witnessed record high trading in the equities and derivatives markets. Singapore continues to be the largest REITs market in Asia outside Japan. Eight new REITs were listed on the Singapore Exchange. In February 2007, we had the first infrastructure finance trust listed on the Singapore Exchange. This new asset class adds to the dynamism of the products we offer.

Given the supportive external economic environment, the Singapore economy is projected to grow between 5% and 7% in 2007. Inflationary pressures should be well-contained, notwithstanding the one-off adjustment in consumer prices associated with the GST increase on 1 July 2007. CPI Inflation should come in at 0.5% to 1.5% under MAS’ current monetary policy of a modest and gradual appreciation of the S$NEER policy band.

Despite the rosy prospects, we believe in “Being Prepared”, as the scouts would say. We continued to focus on risk management last year, especially crisis and business continuity management. We conducted several exercises to test MAS’ and financial institutions’ decision making, communication and coordination efforts during a crisis.


The world economy took a downward turn towards the end of 2007, following several years of robust growth. The US subprime mortgage crisis precipitated a credit squeeze and widespread financial turmoil, and the slower growth in industrialised countries will have spillover effects on other regions. At the same time, the world is facing rising inflation caused primarily by high oil, food and other commodity prices. Navigating these challenging conditions has been a priority for central banks everywhere, including the MAS.

Being an open economy, Singapore is buffeted by these external headwinds. Despite them, the Singapore economy grew by 7.7 percent in 2007, its fourth consecutive year of strong expansion. At the start of 2008, growth continued to be firm, underpinned by the wholesale and retail trade, transport and storage, and financial services sectors. However, Consumer Price Index (CPI) inflation has risen, reaching 6.6 percent in the first quarter of 2008. CPI inflation was 2.1 percent last year and 1 percent in 2006.

Singapore’s economic growth is likely to ease in the next few quarters in view of slowing demand from developed economies. However, the economic prospects for Asia continue to be relatively sanguine in the near term and Singapore will benefit from the region’s growth, especially China’s and India’s. Overall, this year, Singapore’s GDP growth should come in at its medium term potential of around 4 to 6 percent. The bugbear is CPI inflation. It has picked up this year, mainly because of higher global food and oil prices. Against a backdrop of heightened global growth and inflation risks, MAS has to strike the right balance in setting monetary policy. Taking into account both growth and inflation prospects, MAS shifted to a policy of a slightly steeper rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) at the October 2007 policy review. This was followed by the decision to re-centre the exchange rate at the prevailing level of the S$NEER at the subsequent policy meeting in April 2008. In our assessment this monetary policy stance is appropriate to moderate inflation while providing support for sustainable growth over the medium-term.

As the US subprime mortgage market problems snowballed into a wider global financial crisis, MAS intensified financial system surveillance and supervision of financial institutions in Singapore. We worked closely with financial institutions to review their internal stress test results and parameters. We also exchanged information regularly with other regulators and worked with the Singapore Exchange (SGX) to monitor brokers’ exposure, capital adequacy and their ability to meet their payment obligations. MAS continues to emphasise the need for financial institutions to maintain prudent risk management and to provide feedback on potential stresses.


The past year was extremely challenging for central banks around the world. From an environment of strong inflationary pressures in the first half of 2008, the global economy plunged into its worst recession in the post-war period late last year, as key segments of the financial system seized up and trade collapsed.

Singapore, being open and highly dependent on trade, was badly affected by these external developments. After several years of rapid growth, the economy experienced its deepest recession in late 2008 and early 2009. By the first quarter of this year, output had fallen by around 10% from its peak. Notwithstanding this, the domestic financial system remained resilient. Confidence in the Singapore dollar stayed strong.

Recently, global macroeconomic conditions have begun to improve. The unprecedented fiscal and monetary measures adopted around the world have helped to ease the credit crunch and stem the freefall in economic activity. Domestic economic conditions have also started to improve. Nonetheless, the sustainability of the recovery is still uncertain. Much will depend on the strength of the rebound in final demand in the developed economies.

Taking into account the weak growth prospects and moderating inflationary pressures, MAS eased its monetary policy in October 2008 and April 2009. These policy responses were appropriate for maintaining price stability over the medium-term.


Over the past year, the world economy has gradually emerged from its worst recession in the post-war era, with Asia leading the recovery. The resumption of growth was helped by the timely implementation of supportive fiscal and monetary measures around the world. As a result, the global economy is now on a firmer footing, in contrast to a year ago. Still, risks remain on the horizon, particularly with sovereign debt problems emerging from some Eurozone economies. Heightened vigilance is essential in this volatile environment, where economies and financial markets are deeply integrated.

Alongside improving global economic conditions, the Singapore economy has recovered strongly from the recession of 2009. For the rest of 2010, economic activity should continue to be sustained at high levels, supported by growth from a broad range of industries.

Against the backdrop of rapid growth and recovering prices in Asia, some regional governments and central banks have begun to unwind macroeconomic policy supports implemented earlier. In Singapore, MAS shifted to a modest and gradual appreciation of the exchange rate policy band, in addition to an upward re-centering of the band in April 2010. This adjustment to the monetary policy stance will contribute to medium-term price stability in the economy.

Singapore has weathered the financial crisis relatively well. The crisis has, however, greatly altered the global financial landscape. To stay ahead, it is important that we adapt to these changes to ensure that our financial system remains competitive and strong.


Global economic growth recovered in 2010. Asia led the pick-up, driven by robust intra-regional trade and strong demand in domestic markets. The Singapore economy saw a pronounced upswing, growing by 14.5%, following its contraction in 2009.

Headline inflation rose to 2.8% last year, up from 0.6% in 2009. The surge in global food and oil prices contributed to higher local costs. Domestically too, strong economic growth and a tightening labour market exerted upward pressure on business costs, which were in turn passed on as higher prices to consumers. A significant contributor to domestic inflation, however, was the sharp rise in car prices, reflecting both the firmness in purchasing power and cuts in the supply of Certificates of Entitlements (COEs) for car purchases. MAS Core Inflation, which excludes the cost of private road transport and accommodation, was more moderate at 1.5% in 2010.

MAS moved pre-emptively to tighten monetary policy as the economy strengthened. We shifted to a modest and gradual appreciation of the exchange rate policy band in April 2010. Further tightening was undertaken in October 2010 and April 2011 as growth became more entrenched and resource constraints more binding. The tighter monetary policy stance will ensure price stability over the medium term and keep growth on a sustainable path.

For 2011, the underlying drivers of economic growth are expected to remain intact. However, the global expansion is moderating, and major vulnerabilities persist. The ongoing sovereign debt crisis in the European periphery poses significant risks – both to global economic growth and financial stability. Geopolitical tensions in the Middle East/North Africa region pose continuing uncertainties. Asia is facing rising inflation, caused primarily by higher oil, food and other commodity prices but also tighter labour markets. MAS will remain vigilant against this range of potential vulnerabilities.


Four years on, the global financial crisis is still with us. The combination of weak banking systems and overstretched government balance sheets in several European economies has severely eroded investor confidence. Unemployment is at exceptionally high levels in the US and Europe, and still worsening in the latter. Early improvement is unlikely in most of the advanced economies, and downside risks remain high. In Asia, notwithstanding the support from rising domestic demand, growth will be dampened by lacklustre export performances.

Against this external backdrop, Singapore should experience a modest pace of expansion in 2012, well below GDP growth of 4.9% in 2011. The labour market, however, remains at close to full employment levels.

Inflation in Singapore has picked up, alongside the firm economic growth of the past two years and the rise in global commodity prices. Core inflation has risen gradually, although headline CPI inflation has increased sharply. The CPI-All Items inflation rose from 2.8% in 2010 to 5.2% in 2011, before moderating slightly in the first five months of 2012. The main contributors have been increases in imputed rentals on owner-occupied accommodation, which do not involve actual expenditure, and the spike in prices of Certificate of Entitlements for cars. MAS Core Inflation, which excludes the costs of accommodation and private road transport, was more moderate at 2.2% in 2011 and 3% in January-May 2012.1 Inflationary pressures are expected to ease gradually in H2 2012.

Accordingly, MAS’ monetary policy targeted a stronger rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER), except for a temporary reduction in the slope of the policy band in October 2011 due to heightened uncertainty arising from the Euro zone crisis. Our monetary policy stance was aimed at anchoring inflation expectations and ensuring price stability over the medium term, while providing some underpinning for economic growth in an uncertain and volatile external environment.


The global economy is on a firmer footing compared to a year ago. The repair of bank and household balance sheets has progressed, most notably in the United States. Central bank actions, including unconventional monetary policies, have reduced the risks of financial instability and a sharp economic recession. A gradual, if modest, recovery in the G3 economies can now be expected in the second half of 2013, supported by a steady improvement in the housing and labour markets in the US and the short-term effects of concerted monetary and fiscal stimuli in Japan. China is expanding at a more moderate pace, but remains an important source of global demand growth. The rest of Asia should also be supported by resilient domestic demand and increasing intra-regional trade.

Not withstanding this improved global picture, we have not returned to the path of normal growth, especially in the advanced economies. There is a critical need to reduce an over-reliance on monetary policy and achieve greater progress in structural reforms, so as to promote lasting, self-sustaining growth. However, recurring volatility is likely in financial markets during the transition to more normal liquidity conditions and interest rates over the medium term.

Against this backdrop, the Singapore economy is expected to continue on a moderate expansion path of 1—3% this year. The gradual improvement in the global economy will provide some upside to Singapore’s external-oriented industries, while domestic demand is likely to stay resilient.

Our labour market remains tight. This is supporting wages, as well as a further pass-through of cost pressures. MAS Core Inflation, which excludes the costs of accommodation and private road transport, could rise moderately in the latter half of this year. CPI-All Items inflation will ease this year, reflecting the gradual slowdown in the increase in imputed rentals on owner occupied accommodation, and the recent correction in COE premiums due to the package of motor vehicle policy measures.

MAS tightened its monetary policy stance in April  2012  by  increasing slightly the slope of the S$ nominal effective exchange rate (S$NEER) policy band, with no change to the level at which it was centred. This was a measured step, aimed at averting a build-up of price pressures, anchoring inflation expectations and keeping growth on a sustainable path as the economy restructures. The policy stance was maintained in October 2012 and April 2013.

We recognise that inflation will generally be higher than the historical norm during the medium-term transition towards a higher-productivity economy. However, MAS remains vigilant in preventing cost pressures from escalating and ensuring that consumer price inflation stays moderate.

Asset market inflation, especially in housing, remains an important focus for MAS. Low global interest rates put pressure on asset prices and credit growth, with potential knock-on effects on both consumer price inflation and financial stability. MAS has applied targeted macro prudential tools to cool investment demand in the property market, complementing monetary policy in promoting sustainable economic and financial conditions. The measures, together with coordinated actions by other Government agencies, have helped to stabilise the market. We continue to monitor their effects.


The recovery in the global economy has entered a new phase. The advanced economies, which have experienced a slow and protracted recovery from the global financial crisis, are expected to provide much of the impetus for growth in the coming year. The United States is seeing continued labour market strengthening and resilience in private consumption, enabling it to begin a gradual process of normalising monetary policy. In the Euro zone, financial stresses are receding, supporting a modest recovery from recession. Japan has experienced a spurt in growth, aided by unprecedented monetary easing. Asia could benefit from a slight uplift in exports this year, although tighter financial conditions and pockets of political uncertainty are weighing down on domestic demand. Growth in China, still a major engine of the world economy, is expected to moderate as it seeks to rein in the shadow banking sector and restructure its economy.

Global financial resilience has also improved. Bank balance sheets have seen further repair in the advanced economies. Asian banks could face some headwinds from slower economic growth, normalisation of global monetary conditions, and moderation in asset prices. But they remain anchored by healthy capital buffers and sound funding profiles.

The Singapore economy has shifted to a path of lower growth, constrained by slower labour force growth. In this context, the economy grew by a relatively strong 3.9%, compared with 2.5% in 2012. CPI-All Items inflation eased to 2.4% in 2013 from 4.6% in 2012, with the sustained appreciation of the Singapore Dollar dampening imported inflation and policy measures to contain Certificate of Entitlement price increases and property market rentals bearing fruit.

With the gradual improvement in the global economic environment, our economy should see growth of 2-4% this year. CPI-All Items inflation is projected to average 1.5-2.0% in 2014. However, MAS Core Inflation which excludes the cost of accommodation and private road transport is expected to remain firm at 2-3% during this period of economic restructuring. This is higher than the historical norm, and is underpinned by the persistence of a tight labour market while improvements in productivity growth take time.