Singapore's economic growth has slowed somewhat in recent years but the man on the street may be forgiven for not realising it.

Despite the local economy entering a phase of lower medium-term growth since 2010, the labour market is expected to continue operating at full employment, with wages tipped to grow strongly, according to the Monetary Authority of Singapore (MAS).

On the flip side, inflation is also expected to stay elevated as business costs rise.

The central bank highlighted in its macroeconomic review on Tuesday that Singapore's manpower situation is "likely to become more constrained" because of the reduction in foreign worker numbers and a slowdown in the pace of local residents joining the labour force each year.

That in turn is due to Singapore's aging population and the upcoming expiry of temporary employment boosters such as the Special Employment Credit and Wage Credit Scheme, which encourage companies to hire more employees with the Government footing part of the bill.

The upshot of this is that there are likely to be fewer workers available in the market, resulting in higher salaries as companies compete for talent, said the MAS.

"On the whole, hiring is expected to rise across a wider range of sectors over the next few quarters, in contrast to the recent period when jobs were mainly created in the domestic-oriented industries," the central bank said.

It added that "wage growth will be strong, including in the high-wage sectors, which have thus far seen wage growth at or below trend".

Overall wages are expected to rise more this year and next year than the historical average of 3.3 per cent annually, it said.

This is good news for local job-seekers, especially professionals, managers, executives and technicians, known collectively as PMETs. They have not benefited as much from the tighter job market recently, due to a rise in graduate numbers and fewer jobs created for this class of workers.

In fact, the unemployment rate for tertiary-educated residents, such as university graduates, has been on the rise since last year, even as umemployment among less-educated residents has broadly fallen, noted the MAS.

But this situation is anticipated to change due to new manpower policies. Stricter curbs on S Pass and Employment Pass holders should lead businesses to hire more local graduates, particularly at the entry level, the central bank said.

The Fair Consideration Framework, which will kick in next year, will also require employers to advertise PMET job vacancies on a national jobs bank for 14 days before applications for foreigners are allowed to fill the positions.

The situation is not all rosy though. Companies' wage bills will continue to rise: unit labour costs have gone up another 3.9 per cent in the second quarter from a year ago, after rising 8.5 per cent in the first quarter, and are expected to increase further in the near term.

And although salaries are rising, productivity growth has remained weak so far, dealing another blow to firms.

As domestic business costs swell without a corresponding rise in productivity, companies will pass more of the costs on to consumers in the form of higher prices. Inflation will become steeper, especially for everyday services such as haircuts and eating out.

The MAS tips services inflation to rise from 2.4 per cent in the first half of this year to about 3 per cent in the second half and for the whole of next year.

"This will be the first time in nearly two decades that services inflation stays above 2 per cent for three consecutive years," it said.