S’pore on track for moderate growth, inflation to ease further before picking up

SINGAPORE – With the G3 economies expected to register firmer growth for the rest of this year, Singapore’s external-oriented sectors are set to receive some support, the Monetary Authority of Singapore (MAS) said today (April 28) in its twice-yearly Macroeconomic Review.

However, the extent of this uplift may be capped by other global developments, including the slowdown in China, corporate realignments in the IT industry and lingering weakness in the oil-related transport engineering sector, the report said.

Meanwhile, domestic-oriented industries will be bolstered by firm demand and temporary respite from the deferment in foreign worker levy hikes.

Taking into account all these considerations, MAS said the Republic’s economy is on track for a moderate growth of 2 to 4 per cent this year.

The central bank also reiterated its forecast for core inflation to come in between 0.5 and 1.5 per cent this year, while the Consumer Price Index (CPI) all-items inflation is set to be between -0.5 and 0.5 per cent for the whole 2015.

MAS said inflation figures could moderate further in the coming months as global oil prices remain low while cost pass-through from the tight labour market is likely tempered by the moderate economic environment and the suite of budgetary measures announced recently.

However, as underlying cost pressures continue to mount, the pass-through to consumer prices could be more significant, especially if economic conditions improve. Along with some pickup in global oil prices and the dissipation of the effects of budgetary measures, inflation is expected to rise going into 2016.