Updated: 04/30/2014 01:30

S'pore economy to grow 2-4% this year, with headline inflation at 1.5%-2.5%

S'pore economy to grow 2-4% this year, with headline inflation at 1.5%-2.5%

The Monetary Authority of Singapore, MAS, says the Singapore economy is expected to grow between two and four per cent this year. 

In its latest macroeconomic review, the central bank says the outlook for the global economy has brightened, anchored by improving prospects in the US, the Eurozone economies and Japan. 

In the US, the recovery in the labour market will continue to support consumer spending, which should bring about some pickup in corporate capital expenditure, including in business IT upgrading. 

The Eurozone is expected to emerge from two consecutive years of economic contraction, as fiscal drags and financial conditions ease. 

Together with a mild turnaround in the global IT industry, these developments will buttress growth in Asia ex-Japan, even as domestic demand in the ASEAN economies softens and China's GDP growth slows amid its ongoing structural reforms.

Against this backdrop, MAS says Singapore's trade-related sectors should grow at a moderate pace. 

Domestic-oriented activities are expected to stay resilient, supported by construction of transportation, housing and social infrastructure. 

Nevertheless, overall growth will be capped by supply-side constraints, particularly in the labour market. 

The unemployment rate is likely to remain low. 

MAS says domestic cost pressures, particularly stemming from a tight labour market, are likely to remain the primary source of inflation. 

Firms are expected to continue to pass on accumulated costs, which could lead to broad-based price increases across the economy. 

MAS expects the headline inflation rate be between 1.5 and 2.5 per cent.

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