Singapore Announces Third Round of Stimulus Measures Worth S$5.1bn

This week, Philippines inflation eased for the second consecutive month to 2.5% yoy in March from 2.6% in February. Inflation was weighed down by lower cost of transport, which declined by 1.8% yoy in March (1.8% rise in February) partly due to lower global oil prices. Philippines’ BSP Governor Diokno guided that the country’s inflation will likely moderate in the months ahead amid sustained low oil prices, price freeze on basic necessities and lower utility costs. As inflation remains within central bank’s inflation target of 2-4%, and with uncertainty on the domestic economy, Diokno guided that BSP would have room for further monetary policy easing. BSP has lowered its policy rate by a total of 75bps to 3.25% currently. On external demand, Philippines’ exports slowed from 9.4% yoy in January to 2.8% in February. Meanwhile, imports declined for the 10th straight month by 11.6% in February from -2.8% in January. As a result, the country’s trade deficit narrowed to US$1.7bn in February from US$3.5bn in January, its smallest deficit since June 2017. Despite continued positive growth of export, we believe there are downside risks to the country’s exports from weaker external and weak global economic activity. Exports of electronic products are the country’s major exports, and with China’s economic slowdown and global supply chain disruptions, these factors will weigh on Philippines’ exports.

Separately, in Thailand, inflation declined by 0.5% yoy in March from a positive rise of 0.7% in February. This was its first negative CPI since June 2017. The decline in inflation was due to cost of transport and communication, which contracted for the second straight month by 4.9% yoy (-0.5% in February) amid lower global oil prices. In the first three months of 2020, Thailand’s inflation rate averaged 0.4%, which is below Bank of Thailand’s (BOT) inflation target range of 1-3%. Therefore, with a risk of deflation and sharp slowdown in GDP growth in 2020 on the back of the Covid-19 impact, we believe the possibility of further monetary policy easing by BOT. BOT has lowered its policy rate by 50bps this year to 0.75%.

In Singapore, the Government added third round of stimulus measures worth S$5.1bn in the Solidarity Budget on 6 April 2020. The Finance Minister guided that all the fiscal stimulus measures introduced so far will total S$59.9bn or about 12% of GDP. As a result, the country’s fiscal deficit is anticipated to rise to S$44.3bn or 8.3% of GDP, compared to a deficit of S$10.9bn or 2.1% of GDP initially. It was also guided that the Government will draw an additional S$4bn from its reserves to fund the measures. We believe that the measures introduced such as the raising of its wage subsidy as well as the one-off cash pay-out of S$600 for every Singaporean adult above the age of 21 will provide some support to households and businesses following the recent announcement of “circuit breaker” from 7 April to 4 May 2020.

Source: Affin Hwang Research - 10 Apr 2020