Growth prospects have been dampened by an ongoing slowdown in the global electronics industry and recent bank collapses abroad, said the central bank in its latest half-yearly macroeconomic review.
Growth is also set to be subdued in the financial sector amid a dimming external outlook, persistent inflation and restrictive financial conditions. In addition, the recent banking turmoil in the United States and Europe has fanned fears of a broader contagion in the sector, raising downside risks to growth.
While Singapore banks could face losses on their bond holdings amid the sharp rise in interest rates, less than 20 per cent of their total assets are in bonds, said MAS., the US bank which collapsed abruptly last month and marked America's biggest banking failure since the 2008 global financial crisis.
Elsewhere in the economy, the pace of expansion in the domestic-oriented sectors will likely moderate as higher consumer prices and interest rates restrain spending. The central bank expects core inflation to remain elevated over the next few months, as businesses “continue raising prices at a firm pace” to pass on cost increases.
To tackle inflation, the MAS tightened monetary policy five times in a series of scheduled and off-cycle policy moves since October 2021., joining a growing list of central banks that have opted to hit the pause button on tightening amid global growth risks and ebbing inflation.
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