WAGE growth in Singapore will probably halve to 2 to 2.5 per cent in 2009 from around 4 to 5 per cent this year if the country slides into a recession in the third quarter, a top labour union official said on Monday.

Halimah Yacob, deputy head of Singapore's dominant National Trades Union Congress (NTUC) - which represents about 500,000 workers across 1,200 firms - also said a wage-price spiral in Singapore was unlikely as employees curb salary expectations with the slowing global economy.

'A recession may temper negotiations. 2 percent, 2.5 percent - that is about the standard we see in bad times,' Mdm Halimah, who is also a member of parliament, said in an interview.

Basic wages in Singapore grew 4.3 per cent last year, when the economy expanded at a strong pace of 7.7 per cent. But the good times may soon be over as manufacturing shrinks and financial services slow even as higher oil and commodity prices pushed the city-state's inflation to a 26-year high.

The increase of 2 to 2.5 percent predicted by Mdm Halimah would be the weakest since 2003, when wages grew 1.2 percent as Southeast Asia's wealthiest country struggled with the SARS outbreak.

Mdm Halimah said the union, which also runs the largest supermarket chain in Singapore, is still in talks with about 800 firms to revise workers' basic wages this year.

Singapore's economy shrank 6 per cent on an annualised basis after seasonal adjustments in the second quarter.

A technical recession, defined as two consecutive quarters of economic contractions, looks increasingly on the cards as many economists expect negative growth in the current quarter due to falling exports by electronics and pharmaceutical makers.

Slower basic wage rises next year will ease price pressures in Singapore, where year-on-year inflation hit a 26-year peak of 7.5 per cent for the months of April, May and June.

While Singapore's monthly inflation is cooling, helped by falling oil and commodity prices, some economists are worried workers' expectations of rising costs will raise wages, sparking a second round of price hikes.

Mdm Halimah said Singapore is not likely to see a wage-price spiral because the unions under NTUC understand that wage growth should not be faster than productivity.

'I don't have workers coming to me and saying 'I want 10 per cent wage increase.' It is not happening,' she said.

'They know we will do our best to take care of their interests. But doing our best doesn't mean we try to outpace inflation... We have to be tempered with moderation, with pragmatism,' she said.

'Yes, we promote workers' interests. But there is also the long-term interests of Singapore,' Mdm Halimah said. -- REUTERS