Singapore said its economy will expand next year after exiting the deepest recession since independence in 1965, adding to evidence of a regional recovery that’s prompted some policy makers to start removing stimulus.

The economy will grow 3% to 5% in 2010 after shrinking as much as 2.5% this year, the trade ministry said in a statement today. Gross domestic product climbed a revised annualised 14.2% last quarter from the previous three months, the second consecutive expansion, it said.

Asia is leading the world’s recovery from its economic slump, and central banks from Australia to India have started to tighten monetary policy through interest-rate increases and other tools. Singapore, dependent upon a rebound in exports to sustain its expansion, may experience “slower and steadier” growth in the coming quarters, the central bank said last month.






“Singapore’s recovery, like many other Asian economies, will be patchy,” said Vishnu Varathan, an economist at Forecast Singapore Pte. “The policies in place and the actions taken will determine the amount of turbulence we see next year.”

The Singapore dollar was little changed at $1.3847 against the US currency at 8:02 a.m. Consumer prices will gain between 2.5% and 3.5% in 2010, from an earlier prediction of as much as 2%, the government said today, raising its inflation forecast amid higher housing values.

UNWINDING STIMULUS
Growth in Asia’s largest economies including Japan and South Korea is accelerating as companies such as Samsung Electronics Co. report surging profits. Malaysia and Thailand, which are releasing GDP figures in the next few days, are forecast by analysts to post smaller economic declines in the third quarter from a year earlier.

Policy makers around the world are moving to unwind some of the emergency steps they took to counter the world recession after cutting interest rates and outlaying more than $2 trillion in government spending. Asia-Pacific leaders said last week fiscal and monetary stimulus measures need separate exit strategies and timing, as countries seek a balance between protecting nascent growth and preventing asset bubbles.

In Singapore, the central bank said last month it will maintain a zero appreciation stance in its currency policy, after opting for a de-facto devaluation of the Singapore dollar in April to help reverse a collapse in exports. The government also extended a wage subsidy program for employers that was set to expire this year to avoid an increase in job losses.