* Quarter-on-quarter GDP growth seen likely to improve in H2
* MAS lowers forecast range of headline inflation to 1.5-2.0
* Core inflation forecast unchanged at 2-3 pct in 2014
* Too early to ease property-related measures-MAS managing
(Recasts, adds comments)
By Masayuki Kitano
SINGAPORE, July 24 Singapore's economy is still
expected to grow by the projected 2-4 percent in 2014, although
some segments will expand more slowly due to restructuring, the
central bank said on Thursday.
Quarter-on-quarter growth is likely to see a "modest
pick-up" in the second half after a slowdown over the first two
quarters, Monetary Authority of Singapore (MAS) Managing
Director Ravi Menon told reporters.
Major drivers of global growth remain intact, with recent
data suggesting a continued economic expansion in the United
States, while growth in China is likely to come in at around
7-7.5 percent, he said.
"What you're seeing in the economy right now, because of
restructuring, are pockets of weaknesses in several sectors, and
areas of continued strength in other areas," Menon said.
"So on balance, we're still looking at growth of about 2-4
percent... In certain segments of the economy you are going to
see much lower growth."
Sectors that rely on regional demand such as financial
intermediation services are likely to do well and
domestic-oriented ones will probably remain resilient, he said.
The manufacturing sector is now undergoing a transformation,
similar to in the past when some activities in Singapore were
hollowed out but were replaced by others, Menon said.
"What we've seen in the past is a shift from production of
one kind, to production of another kind. Now we're seeing a
shift where the production itself is taking place less and less
"But you're seeing a lot of...testing activities, research
and development, product development and so on taking place
here, and the management of these processes," the MAS managing
director said. "So it will be interesting to see how this pans
Singapore's government has been working to reduce a
politically-unpopular reliance on foreign labour as part of a
push to increase the economy's productivity, but the move has
led to a tight labour market, putting upward pressure on wages.
Menon said the MAS had lowered its 2014 forecast range for
headline inflation to 1.5-2.0 percent from the previous 1.5-2.5
percent, adding that the all-items inflation pace was falling
due to a moderation in housing costs and car prices.
The MAS, however, kept its forecast for core inflation,
which excludes changes in the prices of cars and accommodation,
unchanged at 2-3 percent for 2014.
Core inflation is likely to increase slightly over the rest
of the year from 2.1 percent in the first half, while all-items
inflation is likely to continue to ease after slipping to 1.7
percent in the first half, Menon said.
"Just as we were not unduly alarmed when all-items inflation
was running at 5 percent, we should not be complacent now just
because all-items inflation is running below 2 percent," he
"Our focus remains on core inflation," Menon said, adding
that the aim of monetary policy is to keep core inflation
expectations anchored at around 2.5 percent.
The MAS expects core inflation to be higher than the
historical average of 2 percent over the next few years as the
economy undergoes restructuring, he added.
Menon also added that it was too early to ease
Property prices are still elevated and the levels of debt
among highly-leveraged households also remain high, he said,
adding that to ease measures at a time when global interest
rates are at historical lows could trigger further rises in
In its annual report released on Thursday , the MAS said it
posted a S$15.84 billion ($12.80 billion) net profit in its last
financial year, helped by a drop in the local currency that led
to valuation gains on its foreign currency holdings.
(Editing by Kim Coghill and Richard Borsuk)