SGD likely to strengthen, according to IMF

Inflation in Singapore is likely to pick up, and policy-makers should be wary about the growth and price outlook, which may need further calibration of the country’s monetary policy, according to the International Monetary Fund (IMF).

While making an assessment of the country's economy, IMF noted that its currency appears "somewhat weaker" compared to its medium-term equilibrium level.

The country expanded at a record pace in the first half of the year, making it one of the world's fastest-growing economies in 2010. To manage the inflation, the Singapore central bank uses the Singapore dollar instead of interest rates, and it has allowed a revaluation and shifted to a stance of gradual appreciation.

“The return to a modest and gradual appreciation of the Singapore dollar in nominal effective terms is consistent with internal and external stability,” the IMF said.

It further explained that the Singapore dollar “would likely strengthen in real effective terms over time” amidst an expanding economy and policies to boost productivity growth.

The IMF expects economic growth of 9.9 percent throughout the year, following a contraction of 1.3 percent in 2009 and expansion of 4.9 percent next year.