Monetary Authority of Singapore likely to ease policy in April meeting

Philippines exports growth in January slowed sharply to 9.7% yoy following a double-digit growth of 21.6% in December, but maintained a positive growth for the second consecutive month. Imports increased by 1% yoy in January from -7.6 in December, its first expansion since March 2019. As a result, the trade deficit widened to US$3.5bn from US$2.5bn in December, its widest deficit since April 2019. Exports were continually supported by other mineral products, gold, electronic products, cathodes and sections, other manufactured good, ignition wiring set and other wiring sets used in vehicles, aircrafts and ships as well as chemicals.

Moving forward, we anticipate the challenging external environment to be a downside risk for Philippines’ trade performance. We also believe the slowdown in economic growth of its major trading partners such as China, Japan, US and other Asean countries especially if the Covid-19 outbreak is prolonged will weigh on the country’s external demand and domestic demand in the near term. Similar to other Asean countries, Philippines may introduce economic stimulus in order to soften the impact of the outbreak. This will complement the recent 25bps rate cut done by Bangko Sentral ng Pilipinas (BSP) in February to 3.75%. As BSP still has room to cut rates further, there is a possibility for rates to be lowered by another 25bps in its next meeting on 19th March.

Separately, in Singapore, total employment excluding foreign domestic workers (FDW) rose by 18,300 in 4Q19 compared to 14,700 in 4Q18 but lower from the rise of 21,700 in 3Q19. For 2019 as a whole, total employment growth excluding FDW was 57,000 which was the largest rise in the past five years mainly due to local employment growth (28,300) and increase in foreign workers in construction (13,900). The unemployment rate meanwhile was unchanged at 2.3% in 4Q19 for the second consecutive quarter. In the coming months, uncertainties on the global front amid the virus outbreak will be a downside risk for the country’s labour market. Despite this, the Ministry of Manpower guided that there will be pockets of relative strength that will provide employment opportunities such as construction and information and communications sectors.

In the Monetary Authority of Singapore (MAS) Survey of Professional Forecasters published in March 2020, the respondents lowered their GDP growth forecasts to 0.6% yoy for 2020 compared to the earlier projection of 1.5% in December. Moreover, all respondents cited the Covid-19 escalation as the top downside risk to Singapore’s growth outlook, followed by trade tensions and geopolitical risks. As Singapore’s economy has already slowed to a 10-year low of 0.7% in 2019, to support the economy, we believe MAS will likely ease its monetary policy again in the upcoming meeting in April.

Source: Affin Hwang Research - 13 Mar 2020