Canadian Voice

Singapore's growth outlook in 2023 appears uncertain amid global headwinds, the central bank said on Wednesday, but price pressures may ease as rents, a key component of inflation in the city-state, moderate in coming quarters.

The Monetary Authority of Singapore (MAS) said in a semi-annual report the economy is expected to grow between 0.5% and 2.5%, less than last year's 3.6%, hit by contractions in trade-related sectors amid a global downturn in manufacturing.

But a key driver of inflation, the pace of residential rent increases, may moderate in the second half of the year as housing supply picks up after the pandemic, it added.

"In the quarters ahead, headline and core inflation in Singapore are expected to moderate further," the MAS said, adding that headline inflation, which includes accommodation costs, would come in between 5.5% and 6.5% for 2023.

The moderation in rents will take time to pass through to inflation data, it said.

Already ranked among the most expensive cities in the world, Singapore has seen living costs climb to multi-year highs, sparking questions over its attractiveness as a global business hub.

Public and private residential rents have risen sharply since 2021 by 38% and 43%, respectively, government data show, mainly because of coronavirus-related disruptions in construction.

Earlier this month, the MAS kept its monetary policy unchanged after five successive rounds of tightening since October 2021, including two surprise moves in 2022.

"The prevailing monetary policy stance is sufficiently tight and appropriate for securing medium-term price stability," it said in the report.

The cost of insuring exposure to United States sovereign debt rose to its highest since 2011 on Wednesday, driven up by unease that the government could hit its debt ceiling sooner than expected.

Spreads on U.S. five-year credit default swaps widened to 62 basis points, data from S&P Global (NYSE:SPGI) Market Intelligence showed, up from a close of 59 bps on Tuesday.

This is more than double the level they stood at at the start of the year and represents the highest level since 2011, according to Refinitiv data.

U.S. Treasury Secretary Janet Yellen on Tuesday warned that failure by Congress to raise the government's debt ceiling - and the resulting default - would trigger an "economic catastrophe" that would send interest rates higher for years to come.

The U.S. House of Representatives could as early as Wednesday vote on a bill to sharply cut spending for a decade in exchange for a short-term hike in the debt ceiling, though it was unclear if it had enough support in the Republican majority to pass.

In the early morning hours on Wednesday, the House Rules Committee approved terms of debate for the bill on a partisan vote, a last step before sending it to the full House chamber, which could debate it either later in the day or later this week.

The panel's action came after a prolonged Tuesday meeting that spilled into Wednesday. It was interrupted by an extended recess to allow Republicans to work out last-minute changes to the bill and thus improve chances of passage in the Republican-controlled House.

The result was that Republicans removed a provision that would have ended a tax credit for biofuels that was part of Democratic President Joe Biden's climate change initiatives in the 2022 "Inflation Reduction Act." Several House Republicans, particularly from Midwest states, had rebelled against that provision.

Bending to the far-right wing of the party, Republicans also accelerated some new, tougher work requirements for receiving Medicaid healthcare benefits for the poor.

"The new plan is even more draconian...even more mean. Kicking poor people off of healthcare wasn't enough. They now want to do it faster," said Representative Jim McGovern, the senior Democrat on the committee.

Before advancing the bill, Democrats failed to get permission to offer several amendments on the House floor, including one that would have prevented any future cuts to veterans' benefits, such as programs for su***de prevention, housing assistance and healthcare.

The full House vote will be a test of House Speaker Kevin McCarthy's leadership. He has argued that passing the bill could force Biden to agree to negotiate spending cuts in exchange for lifting the federal government's $31.4 trillion borrowing limit.

House Republicans are offering to increase Washington's borrowing authority by $1.5 trillion or until March 31, whichever comes first. Furthermore, the bill would pare spending to 2022 levels and then cap growth at 1% a year, repeal some tax incentives for renewable energy and stiffen work requirements for some antipoverty programs. Even if it passes the House, it is not seen winning approval in its current form in the Democratic-controlled Senate.

Meanwhile, several House Republicans have voiced opposition to the bill for a variety of reasons, some saying that it does not cut spending enough, others worried that it would take a heavy toll on their home districts. McCarthy can afford to lose only four votes from his narrow 222-213 majority if the bill is to pass.

"Remember what this bill is. This bill is to get us to the negotiating table. It’s not the final provisions," McCarthy told reporters late Tuesday.

The stakes are high: A long 2011 debt-ceiling standoff led to a downgrade of the U.S. government's credit rating, which pushed borrowing costs higher, and Wall Street is already flashing warning signs.

The White House has called on Congress to raise the debt limit without conditions, as it did three times under Biden's Republican predecessor, Donald Trump.

Lawmakers do not know precisely how much time they have left to act. The "x-date" when the Treasury Department would no longer be able to pay all its bills could come as early as June or stretch later into summer.

REPUBLICAN DISSENT

Some Republicans, including Nancy Mace of South Carolina, expressed reservations with the bill, saying it does not go far enough in lowering spending and could hurt her state's solar industry. Similarly, Andy Biggs of Arizona said, "I am dubious about Speaker McCarthy's debt ceiling proposal."

Democrats argue that realistically, the Republican plan would bring an estimated 22% reduction in many social support programs because the military would likely be exempted from spending caps in separate spending bills to be written this spring and summer.

Democrats also argue that the proposed tradeoff of ten years of spending cuts is unreasonable for an increase in the debt ceiling that would trigger another potentially painful round of negotiations early next year, just as the presidential campaign heats up.

"Ten years of cuts for less than one year of preventing a default," said Democratic Representative Rosa DeLauro. "In less than a year we will be back here again."