Singapore’s central bank said Wednesday it suffered a record annual net loss of US$23 billion in the most recent financial year as it tightened monetary policy to battle soaring inflation, and it warned the city-state’s economy still faced headwinds.
Central banks worldwide have embarked on a campaign to cushion the effects of rising prices following Russia’s invasion of Ukraine last year that hammered oil and gas supplies.
But while others have hiked interest rates in their battle, Singapore, which imports most of its needs, has strengthened the local dollar to make imported goods cheaper.
However, that has translated into huge losses in its official foreign reserves, Monetary Authority of Singapore managing director Ravi Menon announced.
The MAS booked a “net loss of Sg$30.8 billion (for the financial year ended March), reflecting the effects of monetary policy tightening to bring down inflation”, he said at the release of its annual report.
“This is the largest loss MAS has ever recorded,” he added.
He said 70 percent of the loss, or Sg$21.4 billion, was down to the “negative currency translation effects of a stronger Singapore dollar”.
The other 30 percent of the loss came from the MAS’s “net interest expenses… from money market operations to mop up excess liquidity in the banking system”.
Menon said inflation has “clearly peaked and has discernibly moderated”.
Core inflation on a month-on-month seasonally adjusted annualised basis fell sharply from a peak of 9.1 percent in June 2022 to 3.6 percent in May 2023, he said.
He said growth prospects for Singapore “have dimmed and the economy will operate slightly below its underlying capacity” as manufacturing and financial services — two key economic pillars — have stalled in recent quarters.
“Growth will remain weak in the near term,” he said.
The trade ministry in May forecast economic growth this year of 0.5-2.5 percent. — Agence France-Presse