Renewed uncertainty stemming from the Eurozone debt crisis, a slowdown in emerging economies and flagging recovery in the US pose major challenges to near-term global economic growth, according to the Monetary Authority of Singapore (MAS).
“The trade-oriented Asian economies are likely to see activity moderating for the rest of the year, although resilient domestic demand will provide some support,” said the report.
Singapore’s GDP growth rebounded by 10 percent quarter-on-quarter on a seasonally-adjusted annualised basis in the first quarter, underpinned by strong gains in the manufacturing sector, indicating a normalisation in IT disk-drive production after it was disrupted due to the Thai floods at the end of last year.
The MAS said the Singapore economy is expected to remain modest for the whole of 2012 against the subdued global backdrop, with GDP forecasted to grow between one and three percent for the rest of the year while the inflation forecast remains unchanged at around 3.5 to 4.5 percent.
“CPI-All Items inflation is expected to remain elevated and volatile over the coming months, reflecting a tight housing rental market and COE supply, which will lead to high accommodation and private road transport costs, respectively,” it said.
“Excluding these items, MAS Core Inflation while lower, will stay firm due to the continued pass-through of earlier wage increases.”
Meanwhile, the G3 economies grew at a mild 1.6 percent quarter-on-quarter on a seasonally adjusted annualised basis in the first quarter, with the US economy climbing 1.9 percent, lower than the three percent growth it recorded in the previous quarter.
However, MAS said the main dampener on growth “came from continued cutbacks in federal defence spending as well as smaller state and local government budgets”. It added that “higher consumption demand also pushed up imports, but export growth kept pace as a weaker dollar boosted competitiveness”.
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