SINGAPORE: Fears of recession in Singapore have been reduced somewhat after a new report suggests the country's inflation is easing. According to a Reuters news agency poll, inflation in the country “probably slowed slightly in October,” which has analysts and government officials optimistic that the city-state will avoid a recession that has been plaguing the economy in recent months. However, the report suggested that rising prices will continue to be a “challenge for policymakers” as the country's economy continues to point to a slowdown. According to the median forecast of 12 economists, Singapore's consumer price index (CPI) likely rose by 4.6 percent in October from a year ago, slightly below September's 4.7 percent pace but well above historical levels of 2-3 percent. Core inflation, which excludes the cost of cars and housing as these are more influenced by government policy, probably edged down to 2.3 percent year-on-year from September's 2.4 percent. The manufacturing sector has already witnessed a slowdown in production and exports over the past few months, which raised concerns that Singapore was facing a recession. The country's Gross Domestic Product (GDP) fell an annualized 1.5 percent in the three months through September from the previous quarter, when it expanded a revised 0.2 percent, the Trade Ministry said on Friday. The central bank, which uses the currency to manage inflation, said it will maintain a modest and gradual appreciation of the local dollar. But fears are continue to gain steam here that the country is headed towards recession, much like the economies of Europe as inflation rises and current worries take hold. Prime Minister Lee Hsien Loong said that he is confident the city-state will avoid being the first major Asian economy to fall into recession this year as there are positive job numbers in the city. The country's inflation slowed to its lowest in two years in August as the global economy continues to be weakened and saw reduced pressure for price increases. The inflation drop also gives the city-state's central bank more mobility to ease monetary policy next month. The consumer price index is expected to rise 3.6 percent in August from a year earlier, down sharply from July's 4.0 percent, according to the median estimate of 11 economists polled by Reuters news agency. If accurate, it would be the lowest it has been in the country since October 2010, when it was reported at 3.5 percent. The core inflation measure, which excludes housing and private car prices, probably rose 2.3 percent year-on-year, slowing from July's 2.4 percent. The Monetary Authority of Singapore (MAS) looks more closely at the core figure when setting policy. “Headline inflation probably eased to 3.6 percent in August, helped in part by a high base last year for transport and housing," Bank of America Merrill Lynch said in a note to clients. “The lower inflation reading will likely give the MAS room to ease policy at the October meeting." Singapore's economy shrank less than anticipated in the second quarter, thanks to a surge in pharmaceutical production in June, gross domestic product (GDP) data showed last month. Economists have told Bikyamasr.com they expect the Southeast Asian city-state's gross domestic product to grow 2.4 percent this year, down from a median estimate of 3.0 percent three months earlier, the central bank's latest quarterly Survey of Professional Forecasters showed.
