SINGAPORE: While Singapore’s households, businesses and financial sector remain resilient to shocks in the financial system, they should stay vigilant in the face of more challenging conditions, the Monetary Authority of Singapore (MAS) said on Friday (Nov 25).
Companies’ financials strengthened during the recovery from the COVID-19 pandemic, while households were supported by continued robust employment gains and strong wage growth, MAS said in its annual financial stability review.
But Singapore’s central bank pointed to a “trifecta of risks” of weaker growth, higher inflation and tighter financing conditions.
The Government has projected the Singapore economy to grow between 0.5 per cent and 2.5 per cent next year, slower than the 3.5 per cent growth expected this year.
At the same time, inflation is expected to stay elevated given a strong labour market and high imported inflation, while the ongoing tightening in financing conditions has further increased borrowers’ debt servicing burden, said MAS.
In October, MAS tightened monetary policy for the fifth time in a year to help dampen inflation. Latest data showed core inflation eased slightly to 5.1 per cent in October, but is projected to stay elevated in the next few quarters.
Domestic indicators of vulnerability for the corporate, household and financial sectors have edged higher, mostly due to the "unwinding of pandemic-induced precautionary buffers", said MAS.
Calling for heightened vigilance from both companies and households, MAS said households should be prudent, especially when committing to large financial obligations such as mortgage loans.
This is so they can have some cushion against the further tightening of financial conditions that is expected in the coming quarters.
MAS said firms should continue to ensure adequate buffers, includin...