Singapore’s central bank said on Wednesday that Asia is facing higher risks from a surge of capital inflows, a tide that could reverse in a disorderly fashion if inflationary pressures were not contained.

The Monetary Authority of Singapore (MAS) issued the warning in its latest macroeconomic review, echoing concerns expressed by policy makers in several emerging Asian economies over hot money that is pushing up regional currencies and stocks.

“An upsurge in inflationary pressures that leads to a disorderly reversal of flows could occur if regional economies are not able to intermediate these flows efficiently,” the MAS said.

The central bank said the risks of another round of financial contagion arising from sovereign defaults and a sharper-than-expected economic downturn in the developed economies have ebbed somewhat.

The MAS -- which tightened monetary policy further this month by widening the trading band for the Singapore dollar -- said inflation in the city-state will remain high until the first half of 2011 before moderating.

Singapore’s economy will hit a slow patch in the immediate quarters ahead due to a fragile global economy before recovering in 2011 on strong Asian growth prospects, as well as continued expansion in financial services and tourism, the MAS said.

Despite the impending slowdown, the economy will grow at a pace of 13% to 15% in 2010, the fastest annual growth ever, and would expand at a more sustainable pace in 2011, it said.