Singapore Expects Inflation To Rise In Second Half Of 2007

Source : AsiaOne News, Aug 27, 2007

SINGAPORE (AP) -- Singapore expects inflation in the second half of this year to be higher than the first half amid strong economic growth, a senior official said Monday.

Last week, the city-state reported that consumer prices rose at their fastest pace in 12 years in July as soaring rents combined with the impact of a sales tax hike.

"In the last 16 quarters we have been enjoying highly robust growth and so one would expect inflation to pick up, and indeed it well may pick up," Trade and Industry Minister Lim Hng Kiang told Parliament. The economy has grown more than 6 percent over the last three years.

He said the government expects costs in the second half of this year to be higher than the first six months, partly reflecting global inflationary trends.

The consumer price index rose 2.6 percent in July from a year earlier, the fastest increase since January 1995. Prices rose 1.3 percent in June from a year ago.

"Overall, we still look at an inflation forecast of between 1-2 percent this year, which is a little higher than our previous years but definitely still very reasonable," Lim told lawmakers.

"In recent quarters, we have seen increases in property prices and rentals as well as wages. We have to maintain vigilance over our costs as excessive cost increases will dampen our growth prospects," Lim said.

The increase in the goods and services tax to 7 percent from 5 percent July 1 was widely expected to boost food and transport prices, and July marked the first month that a long-watched surge in real estate prices finally hit headline inflation.

Lim was responding to questions by parliamentarians on the impact of recent increases in prices, wages, and rentals on the city-state's attractiveness to foreign investors.

Singapore's housing prices have surged in recent months as a boom in the luxury segment began to filter into the mass market.