People rest next to the pond outside the ArtScience museum at the Marina Bay Sands in Singapore on Oct 27, 2023. (PHOTO / AFP)

SINGAPORE — Singapore expects muted prospects for its economy in the short-term amid global uncertainty, but the second half of 2024 should bring gradual improvement, its central bank said on Monday.

In its semi-annual macroeconomic review, the Monetary Authority of Singapore (MAS) said gross domestic product (GDP) growth, which veered on the edge of a technical recession in the middle of the year, should improve gradually next year while core inflation is expected to ease by December.

Core inflation, which excludes private road transport and accommodation costs, has cooled from a 14-year high of 5.5 percent in January to 3.0 percent in September

"The third quarter of this year likely marked the turning point in the slowdown," it said.

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GDP growth was at 0.7 percent year-on-year in the third quarter of this year, according to advance estimates. The Asian financial hub narrowly avoided a technical recession, with the economy expanding 0.1 percent quarter-on-quarter in April to June following a 0.4 percent contraction in the first quarter of 2023.

"In the absence of renewed shocks or setbacks in the global economy, the Singapore economy should benefit as the global tech industry gradually emerges from its trough and global interest rates level off over 2024."

Meanwhile, MAS expects inflation to be on a broad moderating trend and slow to an average of 2.5–3.5 percent for 2024 as a whole.

Core inflation, which excludes private road transport and accommodation costs, has cooled from a 14-year high of 5.5 percent in January to 3.0 percent in September.

There are upside and downside risks to inflation, MAS said.

"Shocks to global food and energy prices or domestic labour costs could bring about additional inflationary pressures. However, a sharper-than-expected downturn in the global economy could induce a general easing of cost and price pressures."

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Against this backdrop, MAS said the current appreciating path of the Singapore dollar nominal effective exchange rate, or S$NEER - is sufficiently tight.

The central bank kept monetary policy settings unchanged in April and October after tightening five times in a row from October 2021.

"The sustained appreciation of the policy band will continue to dampen imported inflation and curb domestic cost pressures, and thus ensure medium-term price stability," said the MAS.