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June 9, 2008

No recession, but high prices will persist - minister

Singapore Finance Minister Tharman Shanmugaratnam has warned that high consumer prices will persist in the city state, where inflation is at a 26-year high, but he said he saw no recession ahead.

Fuel price hikes in Malaysia will raise the price of fresh food and goods such as building materials that Singapore buys from Malaysia, local daily the Straits Times quoted the minister as saying.

"We're in a situation which isn't temporary - this will be with us for a while," he was quoted as saying. "Commodity prices are much higher than what they used to be."

Singapore's inflation accelerated at a faster-than-expected rate of 7.5 percent in April on higher housing, food and oil prices, prompting the government to raise its inflation forecast to 5-6 percent from 4.5-5.5 percent.

"From all indications we have at this point, I don't think we're heading for a recession," Shanmugaratnam said.

The Singapore central bank tightened monetary policy in April by allowing the Singapore dollar, its main policy tool, to go higher to curb imported inflation.

Singapore's trade dependent economy grew at an annualised rate of 14.6 percent in the first quarter after seasonal adjustments as a recovery in drugs production boosted growth.

It was the fastest pace since the second quarter 2005, but below the government's initial estimate of a 16.9 percent rate.
The Malaysian government last week raised petrol prices by 41 percent to 2.70 ringgit ($0.83) a litre, and diesel prices 63 percent to 2.58 ringgit as part of a package of reforms that would save the state $4.2 billion.

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