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Thu, Jul 26, 2007 - Page 10 News List

Inflation rate expected to pick up in Singapore

AFP , SINGAPORE

Singapore's de facto central bank said yesterday it will closely monitor developments as rents and wages rise amid strong economic growth and a property boom.

Inflation will pick up in the second half of the year although price increases have generally been mild with inflation averaging 0.8 percent in the first half, said Heng Swee Keat (王瑞傑), managing director of the Monetary Authority of Singapore (MAS).

"However, business costs have risen alongside the strong growth in the economy, with some components including wages and rentals experiencing more rapid gains recently," Heng said at the release of the MAS 2006 to 2007 annual report.

International consultancy Jones Lang LaSalle said last week that Singapore has emerged as the world's hottest property market this year, with prime real estate up 50 percent in the first six months of this year.

Some foreigners have found themselves hit with rent increases of 50 percent, or more as a result of the property market boom after years of weakness.

Helping to fuel the rental boom is a huge influx of foreigners. The government is seeking to recruit more skilled professionals to augment the local workforce.

Following a two percent increase in the goods and services tax that took effect this month and some increases in the prices of food, transport and oil-related items, inflation "will pick up into the second half of 2007," Heng said.

He said that for the full year, headline inflation is expected to be in the upper half of MAS's forecast of 0.5 percent to 1.5 percent.

He said that, outside of Japan, Singapore is now the largest real estate investment trust (REIT) market in Asia, with 16 listed REITs and a total market capitalization of more than S$27 billion (US$17.9 billion).

The monetary policy stance of a modest and gradual appreciation of the Singapore dollar's nominal effective exchange rate policy band, announced in April, remains in place, Heng said.

MAS conducts monetary policy through managing the local currency's levels rather than by setting interest rates.

Heng said the Singaporean economy grew by a strong 7.3 percent in the first half of the year, based on advance estimates.

In May, the trade ministry upgraded its full-year GDP growth forecast to 5.0-7.0 percent from 4.5 percent to 6.5 percent.

The Singapore dollar was at 1.5065 US dollars in afternoon trade.

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