Questioning the Drag of Prolonged Tightening on Growth

While the MAS's commitment to fighting inflation is understandable, its prolonged tightening cycle risks weighing too heavily on economic growth. A stronger Singapore dollar may help lower import costs, but it also damages the competitiveness of Singapore's export-driven economy. Key sectors like electronics, pharmaceuticals, and precision engineering are already facing weak global demand, and a further appreciation could extend the downturn. Small and medium-sized enterprises that rely on exports will see thin margins squeezed even tighter. Additionally, core inflation is being driven largely by supply-side factors such as higher energy costs and supply chain disruptions, which are not easily tamed by monetary policy. Tightening under these conditions may have limited impact on inflation while imposing unnecessary costs on growth. The MAS's own projection that inflation will only ease by 2027 suggests the cure may be as painful as the disease. There is also a risk of overtightening, which could tip the economy into a slowdown or recession. Consumers, while benefiting from cheaper imports, face higher borrowing costs for mortgages and business loans, which could dampen domestic demand. Some economists argue that the MAS should pause and assess the lagged effects of previous tightenings before adding more pressure.