The lead-up to the semi-annual Monetary Policy Statement (MPS) in
April and October represents the peak of activity for monetary policy
formulation in MAS. Preparation starts six weeks before the release
of the MPS, with a comprehensive assessment of conditions in the external
macroeconomic environment and key sectors such as IT (See Figure 1).
This provides the backdrop for the baseline forecast for the Singapore
economy, using both a bottom-up industry-based surveillance
approach as well as a top-down macroeconomic modeling
approach. These forecasts as well as the results of counterfactual
scenarios on the external environment are used to identify alternative
policy paths of the trade-weighted SGD exchange rate over the medium
term. The macroeconomic implications of each policy option are assessed
with the aid of the Monetary Model of Singapore (MMS), and a recommendation
is made on the optimal policy path.
The findings and recommendation are presented to the Monetary Investment
and Policy Meeting (MIPM) committee for deliberation and decision.
The monetary policy stance is then finalised and announced, followed
by briefings to the media and private sector analysts in conjunction
with the release of the Macroeconomic Review. This document presents
MAS analysis and assessment of macroeconomic developments in
the Singapore economy, and conveys to the public the basis for the
Over the past year, several initiatives were launched to further strengthen
this policy formulation process. On the surveillance front, the Economic
Policy Department (EPD) embarked on an industry consultation process
to gather views from key manufacturers, industry associations and
service providers on the role of exchange rates in their operations,
and the prospects for their industries more generally (See Box 12).
Given that the performance of the Singapore economy is tied closely
to the fortunes of the global IT industry, we are continuously strengthening
our surveillance and forecasting capabilities of the global electronics
industry. A significant improvement has been the construction of an
Electronics Leading Indicator and an Electronics Manufacturers
Index, which provide additional tools in forecasting the domestic
On the macro-modeling front, there were further improvements to the
MMS, including developing a demographic module. This also allows the
MMS to incorporate various demographic assumptions in estimating Singapores
long-term growth potential.