Here are some impacts of a strong SGD on locals and businesses.

Impact on Locals

Increased Purchasing Power for Imports and Travel:

A stronger SGD makes imported goods and services cheaper in SGD terms. This benefits locals by reducing the cost of foreign products, such as electronics, food, and luxury items, which are significant in Singapore’s import-heavy economy (imports and exports combined were 311% of GDP in 2023).

For Singaporeans traveling abroad, a high SGD means better exchange rates, allowing them to spend more in countries like Japan, South Korea, or Malaysia. For example, in 2022, S$1 was exchangeable for 945 KRW or 96 JPY, making travel more affordable.

Example: Luxury travel agents reported increased bookings as Singaporeans took advantage of favorable exchange rates.

Stable or Lower Inflation:

A strong SGD helps curb imported inflation by making foreign goods less expensive. This is critical in Singapore, where nearly 40 cents of every dollar spent domestically goes to imports.

The Monetary Authority of Singapore (MAS) uses a strong SGD to manage inflation, which benefits locals by stabilizing prices for essentials like food and fuel. Core inflation, excluding volatile items, peaked at 5.4% in early 2023 but has since moderated partly due to the strong SGD.

No Direct Impact on Salaries:

For locals earning and spending in SGD, salaries are generally unaffected by a strong SGD. However, indirect effects may arise if businesses face reduced export demand, potentially leading to slower hiring or wage growth in export-oriented sectors.

Potential Downsides:

While a strong SGD benefits consumers, it may reduce foreign tourist arrivals, as Singapore becomes more expensive for visitors. This could impact locals working in tourism-related sectors (e.g., hotels, restaurants), which were noted as less optimistic in a 2024 survey by the Singapore Business Federation.

Locals with foreign currency obligations (e.g., overseas investments or remittances) may face reduced value when converting SGD to weaker currencies like the US dollar or Malaysian ringgit.

Impact on Businesses

Lower Import Costs: Businesses importing raw materials or goods benefit from reduced costs, supporting profitability in manufacturing and retail.

Export Challenges: A stronger SGD makes exports costlier, potentially reducing demand. However, Singapore’s high value-added exports (e.g., electronics, pharmaceuticals) are less price-sensitive, with manufacturing output up 21% in 2024 despite the strong SGD.

Tourism Hit: Hotels and restaurants face reduced tourist arrivals due to higher costs, with a 2024 survey showing pessimism in these sectors.

Financial Sector: A strong SGD attracts capital inflows, benefiting banks and financial firms, though weaker global demand may reduce trading fees.

Summary

MAS have a tough time balancing what is the apporiate level of SGD and it's impact on inflation and export competitiveness