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THE Singapore economy is "on track for moderate growth" despite some external and domestic headwinds, said the Monetary Authority of Singapore (MAS) on Tuesday in its twice-yearly Macroeconomic Review.
Reiterating its 2014 gross domestic product (GDP) growth forecast of 2.5-3.5 per cent this year, and a "broadly similar" pace for 2015, the central bank said: "Sectors that cater to final demand in the US will fare relatively favourably, while those that are tied to the eurozone and China could be weighed down by the sluggish performance in these economies.
"Meanwhile, domestic-oriented sectors will remain resilient on the back of firm underlying demand, although those segments that are more reliant on labour input, or face greater competition, could experience profit margin pressure."
The MAS added that strong labour demand will continue to butt up against labour supply constraints, keeping wage growth firm.
Therefore, domestic cost pressures - mainly stemming from the tight labour market - will remain the "primary source" of inflation.
Two weeks ago, the central bank kept its monetary policy unchanged, just as the market had expected - keeping the Singapore dollar on an appreciating path to guard against inflation.