M3 Surged On Low Base Effect, Improving Loan Growth

Economic Research	01 December 2016
Singapore
Economic Highlights
M3 Surged On Low Base Effect, Improving Loan Growth Singapore’s broad money supply (M3), including Asian currency units, rose 5.9% YoY in October, gaining momentum after a 4% rise the month before. Demand for liquidity was broad-based. Going forward, M3 growth is expected to remain strong in 2017, due to increased foreign inflows. We maintain our projections for GDP to grow 1.4% in 2016. However, as the pick-up in M3 seems to be driven by temporary factors – rather than actual demand – we believe its uplift to GDP growth will be limited. We maintain our projections for GDP to grow 1.4% in 2016, before slowing to 1.2% next year. Less drastic step of re-centring the S$NEER in April 2017. As inflation is heading up, and in anticipation of a bumper 2017 Budget to support growth next year, we believe that the Monetary Authority of Singapore (MAS) would now take the less drastic step of re-centring the S$NEER in April 2017, as opposed to a depreciation of the slope as predicted earlier. October’s loan growth declined at a slower pace. This was on account of an improvement in business loans, while consumer loans held up relatively well during the month. Economist:  Ng Kee Chou | +603 92802179