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Rosier forecasts for Singapore: central bank survey

Roslan Rahman | AFP | Getty Images

Economists have raised their full-year growth forecasts for Singapore, a survey by the central bank showed on Wednesday, reflecting increased optimism about the outlook for the city-state.

According to the Monetary Authority of Singapore's (MAS) latest quarterly Survey of Professional Forecasters, analysts have raised Singapore's median growth forecast to 2.9 percent for 2013, up from a previous estimate of 2.3 percent.

Singapore's economy, heavily dependent on trade, manufacturing and financial services, grew 15.5 percent in the second quarter from the previous quarter, data released last month showed.

On an annual basis, the economy expanded 3.8 percent in the quarter, which was higher than the median forecast of 1.5 percent reported in the June survey, the MAS said. The median forecast for annual growth in the third quarter is 4.0 percent.

A robust economy is one reason why Singapore has held up relatively well despite turmoil in emerging markets and neighboring Asian countries such as Indonesia, which have taken a beating from expectations that U.S. monetary stimulus will be scaled back soon.

(Read more: Emerging Asia rout start of a multi-year bear market?)

"The outlook is not looking that bad for an economy that got off to a soft start to the year," said CIMB Regional Economist Seng Wun Song. "But Singapore is not immune from the emerging market turmoil and if the currency woes of its neighbors continue, that could spill over into the Singapore economy."

Indonesia, Southeast Asia's biggest economy, saw its currency – the rupiah – weaken past 11,000 per U.S. dollar on Tuesday for the first time in more than four years.

A report by Bank of America Merrill Lynch earlier this week meanwhile said that Singapore appeared to be one of the most financially vulnerable countries in the region.

(Read more: Are financial risks in Singapore rising?)

According to the MAS survey, economists forecast Singapore's economy to grow at 3.5 percent in 2014.

They forecast inflation at 2.5 percent in 2013, compared with 2.8 percent in the June survey. Inflation is forecast to pick up in 2014 to 2.9 percent.

Still, the forecasts for inflation this year are below the central bank's forecast of between 3-4 percent in a sign that rising prices are becoming less of a risk to Singapore's economic outlook.

"We are starting to see inflation stabilize although we are seeing pressures come from areas such as wages," said Song.

The MAS said 19 out 26 economists polled responded to its survey, which was sent out on August 12.

—By CNBC.Com's Dhara Ranasinghe; Follow her on Twitter @DharaCNBC

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