Bias for USDSGD is still tilted to the upside

Earlier this week, MAS lowered its headline inflation forecast for Singapore for 2016 to -1 to 0% but kept the core CPI outlook unchanged at -0.5 to 0.5%. At its policy meeting scheduled in mid-April the Monetary Authority of Singapore is widely expected to stick to the status quo but the bias for USD-SGD is still tilted to the upside.

Singapore final Q4 GDP came in at 1.8% y/y compared to the advance estimate of 2%. The main drag came from the manufacturing sector which was revised down to -6.7% y/y vs -6% originally, owing to the weak December industrial production. Despite Q4 growth being revised down to 2.8% from 3.2% originally, services sector provided the main source of growth.

For 2016, the government maintained its conservative 1-3% projection. The key headwinds for the economy in 2016 remain 1) the slowdown in China; and 2) low oil prices. As such, growth is likely to remain mediocre around 2% this year.