SINGAPORE

In its latest

It revised its Asian growth forecast upward to 7.1 per cent for 2010, 1.25 percentage points higher than the projected figure in October 2009, and expects this trend to continue into 2011.

At the same time, the IMF expects the Singapore economy to grow 8.9 per cent this year, in line with the government’s latest growth estimate of 7 to 9 per cent. This is also higher than IMF’s 5.7 per cent forecast issued earlier.

The IMF report stated that Asia’s recovery from the recent economic crisis is driven by resilient domestic demand, backed by rising household consumption and public stimulus.

It expects domestic demand to remain robust as it has developed substantial momentum, despite stimulus packages being gradually withdrawn.

However, the IMF cautioned that while Asia is fast on recovery, policymakers in the region should guard against a build-up of imbalances in local asset and housing markets.

“Brighter economic growth prospects and widening interest rate differentials with advance economies are likely to attract more capital to the region,” stated the report.

“This could lead to overheating in some economies and increase their vulnerability to credit and asset price booms with the risk of subsequent abrupt reversals.”

Still, some economists do not share IMF’s optimism on the Singapore economy, posting lower growth forecasts amid concerns of inflation and sluggish recovery in the developed markets.

Mr Alvin Liew, economist at Standard Chartered, said that at 6.5 per cent, the bank’s outlook for Singapore’s growth is more cautious than the IMF forecast.

“External demand, while recovering, is likely to be lacklustre — especially from the G3 markets, where unemployment may remain stubbornly high,” said Mr Liew, referring to Europe and the US which are still battling the effects of the financial crisis.

Mr Leon Perera, managing director of Spire Research and Consulting, also has a conservative forecast for Singapore at 7 per cent, citing the bearish equity sentiment and commodity price hikes that may dampen growth momentum in the second half of the year.

While overheating threatens China’s equity and property market, he does not foresee a major downward correction in Singapore, despite the overexuberance in the property market here. This is because investor sentiment remains strong and buyers are in it for the long haul, he said.

With regard to lessening Singapore’s dependence on export trades with Western economies, he said it would be imperative for the country to tap more into the emerging markets such as Russia and Africa.

In its