Supported by robust gains in trade and tourism, Signapore’s economy, along with its related exchange traded fund (ETF), grew at a phenomenal rate in the first quarter, prompting the government to revise upward this year’s growth forecasts.
Singapore’s economy expanded 32.1%, its quickest pace in about 35 years, during the first three months of 2010, reports Alex Kennedy for BusinessWeek. The government revised its 2010 forecast to between 7% and 9% from between 4.5% and 6.5%. [Singapore ETFs: Slinging Up to Its Full Potential?]
Industrial production surged 139% from the previous quarter, led by the electronics and biomedical sectors while services grew 11%. The economy relies on trade, finance and tourism.
The Central Bank has shifted its exchange rate target from a 0% appreciation of the Singapore dollar to a more “modest and gradual” appreciation in an attempt to obviate inflation. The government expects inflation to be between 2.5% and 3.5%.
After the Central Bank decided to shift its exchange rate target, Singapore’s currency shot up to a 20-month high, according to The New York Times. Economists estimate that the currency had been revalued 1.2% to 1.4%, and some predict that the currency could reach 1.36 to the U.S. dollar with months, or even approach a record of about 1.345. The Singapore dollar hit 1.3784 against the U.S. dollar recently and has gained 1.9% so far this year.
Singapore’s Central Bank sets its policy only twice a year, and it would have risked being behind if it hadn’t tightened its monetary policy now. The Central Bank manages the Singapore dollar in a secret trade-weighted band against a basket of currencies rather than setting interest rates.
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Max Chen contributed to this article.
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