SINGAPORE: Singapore's central bank said on Wednesday (May 29) it does not engage in currency manipulation, after the United States added the country to a watchlist of trading partners as set out in a semi-annual report by the US Treasury Department.
Singapore, along with eight other trading partners of the US, were added to a "monitoring list" for exchange rate and macroeconomic policies.
The US Treasury cited Singapore's large current account surplus and foreign exchange intervention operations.
In response to media queries on the US Treasury report, the Monetary Authority of Singapore (MAS) said it "does not manipulate its currency for export advantage".
It said Singapore's monetary policy framework, which is centred on the exchange rate, "has always been aimed at ensuring medium-term price stability" and will continue to do so.
MAS manages the Singapore dollar nominal effective exchange rate (S$NEER) within a policy band, just as other central banks conduct monetary policy by targeting interest rates, said the authority.
"MAS does not and cannot use the exchange rate to gain an export advantage or achieve a current account surplus," it said. "A deliberate weakening of the Singapore dollar would cause inflation to spike and compromise MAS’ price stability objective."
The US Treasury report also highlighted Singapore's current account surplus and trade deficit with the United States.
"Singapore runs one of the largest current account surpluses in the world as a share of GDP at 17.9 per cent in 2018. Notwithstanding this large external surplus with the rest of the world, Singapore has consistently run a bilateral goods trade deficit with the United States, which in 2018 totalled US$6 billion," the US Treasury said in its report.
Singapore's current account balance "should be viewed in context", said MAS.
"In its early years of development, Singapore ran persistently large current account deficits averaging close to 10 per cent of GDP between 1965-84, when its investment needs were greater than available saving," said the central bank. "As the economy matured, its investment needs tapered off, while national saving rose.
"Consequently, the current account turned into a surplus position."
Together with rising affluence which will raise consumption, Singapore's current account surplus will be reduced when public and private savings are drawn down for the needs of an ageing population, said MAS.