Singapore consumer prices and wages are expected to rise faster in the second half of 2010 but annual inflation will likely stay within the 2.5-3.5% forecast range, the central bank said on Thursday. 

The Monetary Authority of Singapore (MAS) sees higher global commodity prices and rising domestic car prices to fuel headline inflation for the rest of 2010. But Managing Director Heng Swee Keat said MAS current monetary policy was appropriate. 

 

After an 18.1% year-on-year expansion in the first half, MAS said in its annual report the underlying support for growth for the rest of the year would remain largely intact, but warned of risks from worsening debt woes in Europe. 

 

“If the crisis in Europe worsens, financial contagion spreads and the functioning of the international credit markets becomes impaired, downside risks to global growth could intensify,” said the report released on Thursday. 

 

“Singapore's growth could then be dampened through trade and financial markets channels.” 

 

Singapore announced on July 14 that the economy would grow 13-15% over the full year, making it the fastest growing economy in Asia, after a recession that lasted into the second quarter of 2009.

 

Economists say sequential growth in the second half is expected to shift down a gear as debt woes in Europe and slow growth in the United States will lessen demand for goods from Asia and slowdown the economies.