Singapore's economy on track for 2 to 4 pc growth, says central bank

PUBLISHED : Friday, 25 July, 2014, 1:35am
UPDATED : Friday, 25 July, 2014, 5:31am

Singapore's economy is expected to grow by a targeted 2 to 4 per cent in 2014 despite a first-half slowdown, helped by factors such as improving global demand, the central bank said.

Quarter-on-quarter growth is likely to see a "modest pick-up" in the second half after a slowdown over the first two quarters, Monetary Authority of Singapore (MAS) managing director Ravi Menon said.

Major drivers of global growth remain intact with recent data suggesting continued economic expansion in the US, while growth in China is likely to be around 7 to 7.5 per cent, he said.

"Looking at the year as a whole, the economy remains on track to grow 2 to 4 per cent," Menon said ahead of the release of the MAS annual report.

Sectors that rely on regional demand such as financial services are likely to do well, he said, while domestic-oriented sectors will probably remain resilient.

Menon said the central bank had lowered its 2014 forecast range for headline inflation to 1.5 to 2.0 per cent from the previous 1.5 to 2.5 per cent, adding that inflation was falling due to a moderation in housing costs and car prices. In June, headline consumer inflation had eased more than expected, hitting a three-month low of 1.8 per cent year-on-year.

The MAS kept its forecast for core inflation, which excludes changes in prices of cars and accommodation, unchanged at 2 to 3 per cent for 2014. Core inflation is likely to increase slightly over the rest of the year from 2.1 per cent in the first half, while all-items inflation is likely to continue to ease after slipping to 1.7 per cent in the first half.

"Just as we were not unduly alarmed when all-items inflation was running at 5 per cent, we should not be complacent now just because all-items inflation is running below 2 per cent. Our focus remains on core inflation," Menon said, adding the aim of monetary policy is to keep core inflation expectations anchored at around 2.5 per cent.

Singapore's government has been working to reduce a politically unpopular reliance on foreign labour as part of a push to increase the economy's productivity, but the move has led to a tight labour market, putting upward pressure on wages.