SINGAPORE: The Monetary Authority of Singapore (MAS) is sticking to its projection that Singapore's economic growth for the rest of the year will moderate, after the surprise rebound in the first three months of the year.
Singapore's first-quarter GDP grew 9.9 per cent on quarter and 1.6 per cent on year. This is on the back of a turnaround in the electronics sector as companies restocked, "reflecting a normalisation in disk drive production" following the disruption caused by the Thai floods last year.
The central bank is
sticking to its forecast that Singapore's GDP growth will be modest, at
between one per cent and three per cent this year. It says trade-related
activity is likely to remain "sluggish", particularly in the
electronics sector.
Instead, growth will be anchored by domestic and regional services, such as tourism and the financial industry.
In
its half-yearly Macroeconomic Review Paper, MAS also says Singapore is
adjusting to changes brought about by a tight labour market.
The
restructuring will take place in three phases over the next decade: an
initial cost-adjustment phase where wage and other business costs are
likely to pick up; a consolidation phase where unit labour costs will
rise as productivity enhancements take time to bear fruit; and a
sustainable phase which will see the economy reap the fruits of the
productivity enhancement measures.
The economy will possibly reach the sustainable phase in the second half of this decade, according to the paper.
Inflation
is a cost of this restructuring, says DBS economist Irvin Seah. He says
Singapore is in the initial phase of restructuring and is likely to see
inflation at elevated levels over the next two to three years.
MAS expects Singapore's inflation rates to remain elevated and ease only gradually over the year.
The
CPI-All Items inflation is expected to be 3.5-4.5 per cent for the year
while core inflation (which excludes accommodation and private road
transport) will likely be in the 2.5-3.0 per cent range.
- CNA/ir