The Monetary Authority of Singapore has sounded a cautiously optimistic note in its latest macroeconomic review, saying that the outlook for the global economy has improved slightly, bolstered by steady growth in Asian countries besides Japan.
Still, the MAS warned that prospects for a modest recovery in Singapore over the rest of this year are accompanied by downside risks.
"For one, the relatively sanguine outlook for the advanced economies, on which this recovery is predicated, is not a foregone conclusion," MAS said in its report.
"Also, supply-side constraints could limit the pace of Singapore's cyclical turnaround."
MAS has maintained its growth forecast for the domestic economy, saying Singapore's gross domestic product (GDP) is expected to grow by 1 to 3 per cent this year.
While the economy experienced some consolidation in the first three months of this year, it should see a gradual improvement for the rest of the year, on the back of a recovery in external demand, MAS said.
Inflation is expected to come in at 3 to 4 per cent.
Although core inflation, which excludes accommodation and private road transport. is forecast at 1.5 to 2.5 per cent for the year as a whole, it is expected to rise moderately in the latter half, reflecting persistent tightness in the labour market.