The U.S. Treasury has added Singapore to a watch list for currency manipulation because of the country’s large current account surplus and net foreign exchanges purchases of at least S$17 billion last year, which is equivalent to 4.6 per cent of Singapore’s Gross Domestic Product (GDP).
The watch list will closely examine the foreign exchange policies of the nations on the list. Countries on the list that end up being labelled “currency manipulators” could impact financial markets and face penalties.
In its semi-annual foreign exchange report that was submitted to Congress, the U.S. Treasury said that Singapore could “narrow its large and persistent external surpluses” by ensuring that its real exchange rate is aligned with economic fundamentals and by implementing reforms that will decrease its high saving rate and improve low domestic consumption.
The U.S. Treasury, however, praised Singapore’s pledge to report more intervention data. Read the report’s section on Singapore here:
“Singapore runs one of the largest current account surpluses in the world as a share of GDP at 17.9 percent 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 totaled $6 billion.
“Singapore’s monetary policy is uncommon, since it uses the exchange rate as its primary monetary policy tool. To meet price stability objectives, the authorities use foreign exchange intervention frequently to help guide the exchange rate and keep it within a target band. Treasury estimates that in 2018 Singapore made net foreign exchange purchases of at least $17 billion, equivalent to 4.6 percent of GDP.
“Singaporean authorities announced in May that they would begin publicly disclosing intervention data in 2020. Treasury welcomes this development.
“While certain structural factors contribute to Singapore’s large current account surplus, Singapore should undertake reforms that will lower its high saving rate and boost low domestic consumption, while striving to ensure that its real exchange rate is in line with economic fundamentals, in order to help narrow its large and persistent external surpluses.”
Vietnam and Singapore’s neighbour Malaysia have also been added to the watch list for currency manipulation. Malaysia is placed on the list for currency intervention and a bilateral trade surplus with the US of $27 billion in 2018. Vietnam was flagged for bilateral trade surpluses and a large current account.
Other nations on the watch list include China, Japan, Korea, Germany, Italy, and Ireland. This year, India and Switzerland have been removed from the watch list. Read the Treasury Department’s report in full HERE. -/TISG
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