UPDATE 2-Singapore dollar likely to appreciate-IMF

* Disagreement with authorities on dollar value

* Monetary policy should stay course for now

* Inflation needs to be watched (Adds details)

WASHINGTON, July 23 (Reuters) - The Singapore dollar is somewhat on the weaker side although it is likely to appreciate as economic growth strengthens, the International Monetary Fund said on Friday.

In its annual review of Singapore's economy, the IMF said the modest and gradual rise of the Singapore dollar SGD= "appears consistent with internal and external stability".

An IMF staff report released alongside the review, which details discussions with the authorities, said the exchange rate is about 1 percent below its equilibrium.

IMF staff said the authorities disagreed with that assessment and believed the currency was broadly in line with its fair value. For details, see [ID:nSGE66M0D6]

The IMF forecast that Singapore's economy will expand by 10 percent in 2010 before easing to 4.9 percent next year. This is lower than the government's current projection of a record 13-15 percent growth for 2010.

The IMF said monetary policy settings in Singapore are "broadly appropriate" although it cautioned that the rise in inflation may require changes to monetary policy down the road.

"There is agreement that, barring a significant change of the outlook for growth or inflation, monetary policy should stay the course," the IMF staff report said.

Singapore's central bank said on May 20 that inflation could be about 3 percent this year, within its forecast range of 2.5 percent to 3.5 percent, citing pressure from energy and commodity prices.

The IMF said Singapore's exit from fiscal stimulus measures introduced during the global financial crisis now put fiscal settings "close to neutral and in tune with internal balance." It welcomed plans by the government to increase spending in physical and social infrastructure.