RTTNews - The International Monetary Fund said in a report Monday that Singapore should maintain the monetary policy at current levels until a recovery was clearly established.
Barring a significant deterioration of the outlook for growth or inflation, monetary policy should stay the course until a recovery is clearly established, it said.
The IMF said the current monetary policy setting was appropriate and supported domestic demand without undermining exchange rate stability.
But further in the course of the recovery path, a tightening stance would be warranted to safeguard price stability, through targeting a trend appreciation of the nominal effective exchange rate, the IMF pointed out.
The lender noted that the Resilience Package given out by the Singapore government in its 2009 budget would go a long way in mitigating the impact of the recession on households and businesses, while also promoting the country's long term growth potential.
The lender also said over the medium term, the fiscal policy would play an important role, in order to prepare the economy for a shift in the patterns of global demand. Considerations should also be given for strengthening the role of automatic stabilizers, it said.
The IMF commended the remarkable resilience shown by the financial sector, and also welcomed the the decision of the Monetary Authority of Singapore (MAS), the Hong Kong Monetary Authority, and Bank Negara Malaysia to coordinate the unwinding of deposit guarantees in their respective jurisdictions.
Meanwhile, the IMF in its report also pointed out that the Singapore economy could contract by 7.7% this year, but recover with a growth of 2.5% next year.
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