Singapore’s economy grew 9.9 percent in the first three months of 2012, leading the Monetary Authority of Singapore (MAS) to raise its inflation forecast for the year to between 3.5 and 4.5 percent, from the current 2.5 to 3.5 percent.
On a year-on-year basis, the economy grew 1.6 percent compared to the 3.6 percent rise seen in the previous year. The central bank noted that it would let the local currency appreciate at a “modest and gradual” pace.
The country manages its monetary policy by allowing the local dollar to rise and fall in an undisclosed band against a basket of undisclosed trade-weighted currencies of its main trading partners.
Meanwhile, many analysts expect the central bank to stand by its policy.
“In terms of growth, prospects are looking better compared to a month back. MAS did highlight the inflation risk but they also said pressures will ease,” said Chua Hak Bin, an economist at Bank of America Merrill Lynch.
“The tail risks (to the economy) have receded – that’s why there is the narrower band. They are more comfortable with the slightly steeper slope – it could be half a percent, it could be one percent (further appreciation of the Singapore dollar).”
“Overall, it’s a more bullish statement,” he said.
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