Singapore’s policy makers need to be watchful of escalating prices and overheating risks in the economy after last year’s “exceptional” expansion, Senior Minister of State for Trade and Industry S. Iswaran said.
“There is no need for stimulus measures” even as growth slows this year, Iswaran told parliament in Singapore today. “If anything, we need to be watchful of overheating risks and rising inflationary pressures as the labor market tightens and capacity constraints become more binding.”
“There is no need for stimulus measures” even as growth slows this year, Iswaran told parliament in Singapore today. “If anything, we need to be watchful of overheating risks and rising inflationary pressures as the labor market tightens and capacity constraints become more binding.”
Singapore’s rebound last year from a 2009 global recession has fueled inflation, prompting the central bank to allow faster currency gains and leading the government to implement measures to cool the property market.
Gross domestic product rose 14.7% in 2010, an expansion that probably made the city of 5 million people the fastest-growing economy in the world after Qatar, according to International Monetary Fund estimates.
“Amidst still strong growth, a high level of GDP and tight resource utilization, inflation pressures will likely be the single biggest concern for policy makers in 2011,” said Kit Wei Zheng, a Singapore-based economist at Citigroup Inc. The likelihood of further policy tightening by the central bank in 2011 “remains high,” he said.
CASINO RESORTS
Singapore’s two casino resorts, run by Genting Singapore Plc and Las Vegas Sands Corp., and an “extremely large expansion” in pharmaceutical output contributed to last year’s growth, Iswaran said. The government’s forecast for an expansion of as much as 6% this year is still above the island’s medium-term growth potential, he said.
The Monetary Authority of Singapore, the island’s central bank, predicts inflation will average between 2% and 3% this year. Consumer prices rose 3.8% in November, the biggest increase in 22 months.
The inflation rate “is expected to rise further in the first quarter of this year before moderating in subsequent quarters,” Finance Minister Tharman Shanmugaratnam said in parliament today. Food-price inflation is a concern, he said.
The central bank said in October it would steepen and widen the currency’s trading band while continuing to seek a “modest and gradual appreciation,” after undertaking a one-time revaluation in April. Singapore, which uses the exchange rate rather than a benchmark interest rate as its main tool to manage inflation, guides the local dollar against a basket of currencies within an undisclosed band.
Market analysts expect local interest rates to stay low, Shanmugaratnam said, adding that the current levels of borrowing costs reflect global monetary conditions.
The city state added 82,000 jobs in the nine months through September, pushing the unemployment rate to 2.1%, the lowest level in 2 1/2 years. Average wages before adjusting for inflation rose 5.4% in the third quarter from a year earlier.
Singapore’s growth this year “will support job creation and wage growth in both the manufacturing and services industries,” Iswaran said.
No comments:
Post a Comment