S’pore sees 2011 inflation peaking near 6 pct

Alex Kennedy

Singapore raised its 2011 inflation forecast Thursday as a booming economy and surging global food and energy costs boosted prices.

Prices will likely rise between 3 and 4 percent this year, one percentage point higher than the previous estimate, the Trade and Industry Ministry said. The government said it expects inflation to peak as high as 6 percent in the first half before dropping in the second half.

A jump in food and fuel costs and robust economic growth have helped push prices higher throughout Asia, leading many of the region’s central banks to raise interest rates in a bid to ease consumer demand and economic activity.”

“The inflationary concerns in Asia may prompt further monetary tightening,” the ministry said. “Domestically, the economy is also facing a tighter labor market.”

Quickening inflation makes it more likely Singapore’s central bank will decide to allow the country’s currency to strengthen at its next biannual policy meeting in April in a bid to lower the cost of imported products, analysts said.

“A key driver of price pressures has been higher imported prices,” said Wai Ho Leong of Barclays Capital. “The focus of policy has tilted towards inflation, a situation we expect to prevail through to the next policy meeting.”

Singapore’s economy soared 14.5 percent last year, rebounding from a 0.8 contraction in 2009, as global demand for the city-state’s exports recovered from a slump the previous year, the ministry said.

Gross domestic product expanded 12 percent in the fourth quarter from a year ago, compared with 10.5 percent in the third quarter, the ministry said.

Manufacturing soared 26 percent in the fourth quarter from the previous year while services gained 8.8 percent and construction dropped 2 percent, the ministry said. Visitor arrivals and tourism revenue jumped to record highs last year as Singapore’s first two casino resorts opened.

The economy grew an annualized, seasonally adjusted 3.9 percent in the fourth quarter after contracting 16.7 percent in the third.

The ministry left this year’s growth forecast of 4 to 6 percent unchanged while it raised its forecast for non-oil domestic exports by 2 percentage points to between 8 and 10 percent growth in 2011.

“The steady pace of growth in the advanced economies is expected to lend support to Singapore’s manufacturing activities,” it said. “Strong visitor arrivals will continue to underpin growth in Singapore’s tourism-related services sectors.”



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