Tharman says S'pore may follow world economy in slowdown

SINGAPORE - Singapore's inflation should ease towards the end of the year from its 26-year high, but the country can be hit by a further slowdown in the world economy, the Finance Minister was quoted as saying on Thursday.

A local television channel quoted Finance Minister Tharman Shanmugaratnam as saying it could take another year before growth bottoms out. 'We have to expect continued weakness in the global economy, which might extend into next year and we won't be able to avoid a slowdown if that happens,' he said. 'The situation now is different from what it was three months ago. The American economy is in a much more perilous state now and the risks facing the financial system, which is a global system and not just an American system, are still very substantial.'

Singapore's economy - forecast to grow at 4-6 per cent this year - suffered its biggest contraction in five years in the second quarter as exports to the United States and Europe tumbled.

But economists said the annualised and seasonally adjusted 6.6 per cent contraction was exaggerated by a slump in volatile drugs output, and the economy should avoid slipping into recession, defined as two consecutive quarters of contraction.

Annual inflation held at 7.5 per cent in June - its highest level since 1982 - reflecting a rise in housing and food costs.

'Food prices have also somewhat levelled off. So our expectation is we should be within our latest inflation forecast of 6 to 7 per cent - lower inflation at the end of the year compared to what we saw in the first half of the year,' Mr Tharman was quoted as saying. -- REUTERS

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