(Bloomberg) — Singapore’s central bank is likely to keep monetary policy unchanged Wednesday as it allows fiscal measures to do the heavy lifting in getting the city-state’s economy back on track.

The Monetary Authority of Singapore, which uses the currency as its main policy tool rather than interest rates, probably will refrain from changing any of the three currency band settings, according to all 19 economists surveyed by Bloomberg.



chart: Singapore Monetary Policy History


© Bloomberg
Singapore Monetary Policy History

The MAS — which typically makes policy decisions twice a year, in April and October — took the unprecedented step in its last announcement of lowering the midpoint of the currency band and reducing the slope to zero. That meant it would allow for a weaker exchange rate to head off deflation and support the export-reliant economy.

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Since then, the economy has plunged into recession amid the pandemic and the government has unleashed billions of dollars of stimulus to save businesses and jobs. The city-state is slowly starting to shake off the impact of mobility restrictions and exports have continued to gain, but the recovery is likely to be a slow one as international travel restrictions remain and global demand stays weak.

“We’ve not seen the full extent of the crisis” and as much as 20% of the economy will face “deep scarring from which they may not recover,” MAS Managing Director Ravi Menon said Monday during a virtual forum hosted by the Institute of International Finance.

While the city-state has likely seen the worst of the GDP downswing, Menon said non-performing loans and bankruptcies probably will rise through the start of 2021.

The government has forecast a 5%-7% contraction in the economy this year, the worst since independence more than a half-century ago, and may revise that estimate when the Ministry of

(Bloomberg) — Singapore’s central bank is likely to keep monetary policy unchanged Wednesday as it allows fiscal measures to do the heavy lifting in getting the city-state’s economy back on track.

The Monetary Authority of Singapore, which uses the currency as its main policy tool rather than interest rates, probably will refrain from changing any of the three currency band settings, according to all 19 economists surveyed by Bloomberg.



chart: Singapore Monetary Policy History


© Bloomberg
Singapore Monetary Policy History

The MAS — which typically makes policy decisions twice a year, in April and October — took the unprecedented step in its last announcement of lowering the midpoint of the currency band and reducing the slope to zero. That meant it would allow for a weaker exchange rate to head off deflation and support the export-reliant economy.

Loading...

Load Error

Since then, the economy has plunged into recession amid the pandemic and the government has unleashed billions of dollars of stimulus to save businesses and jobs. The city-state is slowly starting to shake off the impact of mobility restrictions and exports have continued to gain, but the recovery is likely to be a slow one as international travel restrictions remain and global demand stays weak.

The government has forecast a 5%-7% contraction in the economy this year, the worst since independence more than a half-century ago, and may revise that estimate when the Ministry of Trade & Industry releases advance third-quarter figures on Wednesday. Analysts project gross domestic product rebounded an annualized 33.5% on a quarterly basis in the three months through September, while declining 6.8% from a year earlier, Bloomberg survey data show.



chart: Bouncing Back


© Bloomberg
Bouncing Back

Here’s a look at what’s expected in the central bank’s statement, which is due to be released at 8 a.m. local time on Wednesday:

Policy Band

The MAS

The S&P 500 (Index: SPX) closed the trading week ending Friday, 9 October 2020 at 3,477.13. That falls within three percent of its 3 September 2020 all-time record high close of 3,580.84.

The index rose, fell, and rose again with the prospects for another round of fiscal coronavirus stimulus coming from the U.S. government during the week. That action puts the level of the S&P 500 in the upper half of the latest redzone forecast range of the alternative futures chart – the latest update to which shows the projections of the dividend futures-based model through the end of 2020:

What the alternative futures chart doesn’t yet show is what could result for markets following the outcome of the U.S. elections. Here, if candidate Joe Biden wins, we would anticipate a partial repeat of 2012’s Great Dividend Raid.

That event was triggered in November 2012 after President Obama won re-election, which all but ensured an increase in federal income tax rates in 2013. Influential investors pulled ahead as much dividends as they could before the end of the year, which caused stock prices to rise sharply.

That would be the portion of the Great Dividend Raid we would reasonably expect to repeat during the fourth quarter of 2020 in the “Biden wins” scenario, because he has pledged to increase both personal and corporate income tax rates, and also the tax rates that apply upon both dividends and capital gains.

All these tax hikes would potentially devastate the market in 2021, but that would depend upon the actual tax changes that would be enacted. In 2013, President Obama’s fiscal cliff tax deal raised personal income tax rates, but lower tax rates held for dividends and capital gains, making it advantageous for influential investors to channel investment returns through them rather than

The headlines make the situation seem like a curiosity.

For investors, Wall Street analysts, and even some financial journalists, the reality of the damage to the economy, several weeks after the initial round of fiscal support expired, may indeed seem like a spectacle.

But it’s not that way for millions of Americans out of work or struggling to pay the rent or buy food in the wake of this year’s coronavirus pandemic.

It may not need saying that the longer the economy goes without another financial aid package, the worse the situation may become. But some analysts increasingly think it will also soon start to make an impact where it cannot be ignored: in the financial markets.

“Stimulus is the wrong word for this,” said David Rosenberg, a long-time strategist now running his own firm, Rosenberg Research. “This not classic Keynesian stimulus. It’s a lifeline to get us through. The stimulus has become what the Phase One Trade deal was last year.”

Week after week, roughly 800,000 Americans file for first-time jobless benefits, the springtime Congressional stimulus money has run out, and things are generally growing more dire for businesses and households, Rosenberg thinks. “If they don’t pass some sort of bill quickly, how many businesses will go under, how many missed payments will we see on rent, debt service, and utilities? The next few months are really critical. I’m quite amazed that there’s quibbling over a hundred billion dollars here and there with so much at stake.”

See: Yes, the U.S. economy really does need more fiscal stimulus – and the stock market knows it

It’s important to note that Rosenberg and other analysts do believe that some sort of stimulus package will be enacted eventually. And so does the stock market, which has been gravitating toward areas investors

JOHANNESBURG, Oct 9 (Reuters)South Africa is heading for a budget crisis by the 2024/25 fiscal year unless it addresses a widening gap between revenue and expenditure, Finance Minister Tito Mboweni said on Friday.

At an emergency budget in June in response to the coronavirus crisis, Mboweni likened the country’s rising debt levels to a hippopotamus “eating our children’s inheritance”.

“A fiscal crisis is on its way by 2024/25 if we do not take serious measures to close the mouth of the hippopotamus,” Mboweni said in comments posted on the National Treasury’s Twitter account on Friday.

Africa’s most advanced economy was in recession before COVID-19 ravaged its economy, with the government’s strict lockdown imposed late in March putting major strain on businesses and households.

The lockdown dragged growth to its worst contraction ever in the second quarter and cost the economy over 2 million jobs.

“Estimates are that revenue for the year is going to contract by about 302 billion rand ($18.4 billion) and yet the pressure on the expenditure side is growing,” Mboweni added.

“If we head towards a fiscal crisis, then we have a sovereign crisis, and then a banking crisis. We can no longer live beyond our means.”

Apart from spending more to contain the spread of the coronavirus and cushion its impact on the poor, the government is also facing growing needs from struggling state-owned companies such as South African Airways and defence company Denel.

In June the Treasury forecast that the main budget deficit would widen to 14.6% of gross domestic product in the current 2020/21 fiscal year – the highest since the end of apartheid in 1994.

($1 = 16.4099 rand)

(Reporting by Olivia Kumwenda-Mtambo; Editing by Alexander Winning and Alex Richardson)

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