Singapore central bank loses billions as currency soars

Singapore's business district skyline at dusk
Stephen Studd | The Photographer's Choice | Getty Images
Singapore's business district skyline at dusk

Singapore's central bank posted a S$10.61 billion ($8.39 billion) net loss in its last fiscal year as the local dollar's gains against the yen and euro diminished the value of its foreign currency holdings.

The Monetary Authority of Singapore (MAS) also said the city-state's economy will "comfortably" meet the official growth forecast of 1-3 percent for 2013, while inflation for the full year is expected to come in at 2-3 percent, lower than the earlier estimate of 3-4 percent.

MAS's loss for the financial year ended March 2013, its second in three years, was just slightly below the record S$10.9 billion deficit incurred in financial year 2010/11 when the Singapore dollar also soared.

(Read More: Red flags for Singapore economy as exports slump)

MAS made a net profit of S$2.77 billion in FY2011/12.

"We made good investment returns, but when measured in Singapore dollars these gains were more than offset by the strength of the currency," managing director Ravi Menon said on Tuesday at a press briefing for the release of the central bank's annual report.

The Singapore dollar gained 13.8 percent against the yen and 6.2 percent against the euro in the 12 months to March, the MAS said. During the same period, the Singapore dollar rose 5.1 percent versus the British pound and 1.3 percent against the dollar.

The central bank had total assets of S$340.4 billion as at end-March 2013, up from S$319.2 billion at the end of the previous financial year. Assets held by the MAS are mainly for managing the Singapore dollar's value against a basket of currencies and to defend the local unit when required. The task of ensuring the country earns adequate returns on its massive foreign exchange reserves lies with GIC, formerly known as the Government of Singapore Investment Corp, which has an estimated $300 billion.

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On the Singapore economy, that MAS said that growth in the first half of 2013 was estimated at 2 percent and should pick up during the latter part of the year.

The economy grew by just 1.3 percent in 2012.

The report added that headline inflation would ease this year from last year's 4.6 percent, but core inflation -- which excludes the cost of cars and accommodation -- could rise "moderately" to 2 percent or slightly higher in the latter half of 2013 due to continuing tightness in the labor market. MAS maintained its core inflation forecast for 2013 at 1.5 to 2.5 percent. Menon said MAS's current policy stance for modest appreciation of the Singapore dollar was appropriate for containing the re-emergence of strong cost pressures.

MAS, in its annual report, also touched on the need to ensure more Singaporeans get jobs in the financial sector, particularly in senior positions, addressing a sore point among locals who feel some foreign managers prefer to hire their own countrymen.

(Read More: Singapore growth soars 15.2% in second quarter)

Singapore Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam, who is also MAS chairman, has discussed the issue with heads of banks based in the city-state, according to various local media reports.

Advertisements in local media taken up by a body backed by the city-state's manpower ministry earlier this year showed several financial firms had acknowledged "hot spots" within their organisations where "clusters of employees from the same country appeared to have developed over time".

"As Singapore's financial center remains open to global talent, MAS is making concerted efforts to put in place initiatives to develop a strong core of Singaporean financial sector professionals," the central bank said in its report.

"MAS will work closely with financial institutions to nurture Singaporeans for leadership roles, through training and different jobs and country exposures."