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Exceptionally strong growth ahead for Singapore, and stronger dollar

By Terence

Singapore: Exceptionally strong growth was seen in the first quarter of 2010 and the Trade and Industry Ministry (MTI) says it now expects Singapore’s economy to grow by 7.0 to 9.0% during the current year.

The revision upwards from an earlier 4.5-6.5% GDP growth is in view of the “exceptionally strong growth for the Singapore economy” in the first quarter and the overall improved outlook for external economies for the rest of 2010, MTI said in its news release on Wednesday.

In view of the rebound of the Singapore economy and expected firm recovery with a more favourable global economic outlook the MAS will re-centre the exchange rate policy band for the Singapore dollar at the prevailing level and shift the policy band from zero percent appreciation to a modest and gradual appreciation.

The decision to allow for a stronger dollar was influenced by the tightening of the labour market with the seasonally adjusted resident unemployment rate falling from 5% in September 2009 to around its pre-crisis rate of 3% in December, and
an expected pick-up of wages this year.

Overall, Singapore should see inflation in 2010 at between 2.5% and 3.5%, which is slightly higher than the 2-3% forecast earlier.

Experts say the move to move by MAS indicates that the view that domestic inflation is the concern now that economic growth has settled in.

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