With this year's GDP growth forecast at –4 to –7 per cent, Singapore is facing the most severe recession in history, said Ravi Menon, Managing Director, Monetary Authority of Singapore (MAS).
The focus of MAS' macroeconomic policy response, therefore, is not so much to stimulate headline GDP growth per se. "That's not going to be possible because both supply and demand are severely impaired globally.
Menon was speaking in a podcast with Tim Adams, President and CEO, Institute of International Finance, on Singapore's COVID-19 risks and policy responses.
He explained that current border control restrictions on people movement is meant to reduce activity till the infection rate of the novel coronavirus is reduced. "So almost by definition, you're not going to get much production or economic activity."
Singapore's key focus in terms of monetary policy right now "is not so much the GDP growth rate, but to support businesses, support workers, support households, sustain them through this period, lay the foundations for economic recovery and then emerge stronger from the crisis.
"The centrepiece of the island-state's response has been fiscal policy, with the government implementing four packages in as many months.
"The slew of fiscal measures which would be familiar to many people, is broadly similar to what many others have been doing: wage subsidy for businesses, cash transfers for households, and also various kinds of training and other support for capability building."
The total fiscal spending has accumulated to about 20 per cent of Singapore GDP, which Menon noted is one of the highest in the world. The country's "healthy stock of reserves" has been helpful in implementing the measures.
MAS role, added Menon, is supportive of fiscal policy in three distinct ways – namely, in easing monetary policy in line with the slowdown in the economy; ensuring the smooth functioning of the funding markets; and facilitating the flow of credit to the real economy.