Singapore’s US$129 billion economy is set for growth of at least 7-8 per cent this year, reflecting buoyant construction across the island

Inflation in Singapore is seen rising to 2.7 per cent year-on-year in the fourth quarter this year, with consumer prices potentially surging up to 5 per cent in the first quarter of 2008, the government said on Monday.

Inflation, which hit a 12-year high of 2.9 per cent in August, would moderate in the second half of next year, Lim Hng Kiang, Singapore’s Minister for Trade and Industry, told parliament.

‘We expect the fourth quarter to be around 2.7 per cent, or even slightly higher. We expect first quarter of next year to reach the peak of between 4, or maybe even 5 per cent. This is because of the base effects of the first quarter of 2007,’ said Mr Lim.

First quarter 2007 inflation was only 0.5 per cent year-on-year. Inflation averaged just 1 per cent in 2006, and a tight labour market, together with higher prices, may give the central bank reason to allow a further rise of the Singapore dollar to keep inflation in check.

‘The pickup in inflation in Singapore should also be viewed from the perspective of the rapid economic growth over the last three years. GDP has grown by more than 6 per cent on average since 2003,’ Mr Lim said.

‘Wages have also been growing, especially last year and this year. Against this backdrop, we should not be surprised to see inflation rise above the unusually low levels seen in recent years.’

Mr Lim noted that an actual increase in the cost of living depended on individual households’ spending patterns. He also pointed to technical factors that have fuelled a rise in the CPI figures.

Singapore’s US$129 billion economy is set for growth of at least 7-8 per cent this year, reflecting buoyant construction across the island just half the size of Greater London, a rebound in manufacturing and strong business for bankers and fund managers. — REUTERS

Source : Business Times - 12 Nov 2007