INFLATION TIPPED TO RISE WITH SINGAPORE'S STRONG GROWTH

By Tengku Noor Shamsiah Tengku Abdullah
SINGAPORE, June 9 (Bernama) -- Singapore's inflation is expected to rise
this year as economists in the latest Monetary Authority of Singapore (MAS)
survey upgraded their forecasts of gross domestic product growth to 6.2 per cent
expansion this year.

The upgrade is an increase from their forecasts of 5.7 per cent just three
months ago and is at the mid-point of the government's recently upgraded 5-7 per
cent projection.

But as expectations for growth have climbed, so have worries over inflation,
according to the survey, which was released Wednesday.

The quarterly poll, involving 21 economists surveyed last month, found that
their median inflation forecast has now inched up to 4.1 per cent -- a notch
higher than the 4 per cent they predicted back in March.

More significantly, this forecast surpasses the official tip of between 3
and 4 per cent inflation this year.

The higher projection comes despite the government indicating in April that
inflation has probably peaked in the first quarter of this year and will ease in
the coming months.

The Straits Times reported that economists, however, believed that rising
food and oil prices and tighter foreign labour policies might feed into
inflation in the second half of the year.

Bank of America Merrill Lynch economist, Dr Chua Hak Bin, said the current
tight labour market and policies may create wage pressures that appear only
later on.

"I think most agree that inflation has peaked but disagree with the
government over how fast it will drop," said Chua, who expected inflation at 4.2
per cent for the year.

He said the government probably factored in a faster pace of moderation,
which accounted for the slight difference in forecasts.

Barclays Capital economist, Leong Wai Ho, said as food prices seemed to
stabilise, the threat of another food supply shock still remained.

He pointed this was especially so with the sudden dry weather causing
droughts in China and Taiwan.

However, he said, inflation could still come in below 4 per cent overall,
especially since car prices -- which form 16 per cent of the consumer price
index -- were not accelerating.

His own forecast is for 3.7 per cent inflation.

The economists said the upgrades to both growth and inflation forecasts were
not surprising considering that the Singapore's economy grew at a
faster-than-expected 8.3 per cent in the first quarter.

They said even an anticipated dip in growth in the second quarter -- to just
two per cent year on year -- was not likely to derail a solid full-year
expansion.

Economist David Cohen, who has forecast 6.5 per cent growth for the year,
said that barring a double dip in the global economy, growth figures should
remain robust.

"The 8.3 per cent figure was really strong and lifted the average growth
figures across-the-board," he said.

Leong also pointed to new investments in the services sector, such as
additions to office space in the Marina Bay Financial Centre, that had
accelerated services growth.

Some economists, however, were more pessimistic about Singapore's growth
prospects.

JP Morgan's Matt Hildebrandt has cut his growth forecast from 5.3 per cent
to 4.7 per cent.

He cited a slowdown in global manufacturing, higher oil prices dampening
consumer spending, and supply chain constraints after Japan's natural disasters.

"While we expect global growth to rebound in the second half, there are
signs that the pick-up may not happen until later in the third quarter, or may
not be as strong as we once thought.

"Any time global growth disappoints, Singapore's growth probably will too,"
he said.

The survey also noted that the Singapore dollar is expected to strengthen
to S$1.21 against the greenback, up from the $1.23 prediction three months ago.

Interest rates are also expected to remain low, while bank loans should
grow 15.8 per cent this year, said the survey.
-- BERNAMA