Growth in the domestic facing sectors is likely to taper, as consumer demand slows in the face of higher interest rates and more moderate wage increases. Singapore's GDP growth for 2023 is expected to slow to a below-trend pace within MTI's current forecast range. Consequently, the output gap is estimated to turn mildly negative, to around -0.5%, from the positive 0.6% recorded last year. Inflation in Singapore has clearly peaked and has discernibly moderated. In assessing inflation trends, it is instructive to focus on month-on-month momentum and price trends going forward rather than year-ago averages. Core inflation on a month-on-month seasonally adjusted annualised basis has come down sharply, to 3.6% in May 2023 from a peak of 9.1% in June 2022. The disinflation has been broad-based across most components in the core CPI basket. Notably, imported inflation has turned negative, reflecting the decline in global energy and food prices and the effects of a stronger Singapore Dollar. Even excluding oil, whose prices have fallen most sharply, imported inflation was minus 1.2% in May this year. The fall in inflation momentum is gradually translating to lower year-on-year inflation. Core inflation on a year-on-year basis moderated to 4.8% in Apr-May from 5.4% in Q1. Headline inflation slowed to 5.4% from 6.1% over the same period. Singapore should see further reductions in inflation by the end of the year. One, imported inflation should remain negative over the rest of the year.
Central banks whose currencies appreciated, like the Swiss National Bank (SNB), recorded negative currency translation effects. Central banks with large investment portfolios, like the SNB, Hong Kong Monetary Authority, and Norges Bank, were negatively impacted by the sell-off in global bond and equity markets. Notwithstanding the financial loss, MAS' OFR position remains strong and we transferred $ billion of excess OFR to the Government in this financial year. MAS transfers OFR above what it needs to conduct monetary policy and support financial stability, to the Government for longer-term management by GIC. In FY22/23, MAS transferred a total of $ billion of OFR to the Government. Even after the transfer, the OFR stood at $ billion (or $ billion) as at end May 2023. This is over two-thirds of GDP, much higher than in almost any other country. How does the loss recorded by MAS affect the Government Budget? First, MAS will not accrue a contribution to the Government's Consolidated Fund in FY22/23 but will make a contribution of $ billion based on past profits. Like other statutory boards, MAS makes a contribution to the Consolidated Fund based on 17% of the net profit for the year, after offsetting cumulative losses from previous financial years. In the case of MAS, as our net profits vary considerably from year to year, our annual contributions to the Consolidated Fund are paid in equal proportions over three years, so as to smoothen Government's revenue volatility.