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Singapore joins the extreme weather club

An unusually snowy U.S. winter, a heat wave in Australia and the wettest winter in the U.K. in 250 years. Another addition to the list of recent extreme weather is the prolonged dry spell in Singapore.

Singapore registered its driest month in February since 1869, according to the country's National Environment Agency, and the dry spell that began in January is expected to last until at least mid-March.

(Read more: Why farmers, investors are bracing for El Nino)

Adding to the dry weather is a haze – a fog with a smoky smell resulting from farmers in Indonesia setting fires to clear land. It drifts over Singapore as wind direction changes.

A view of highrise Marina financial district office buildings (R) are seen from Marina Bay promenade, Singapore
Roslan Rahman | AFP| Getty Images
A view of highrise Marina financial district office buildings (R) are seen from Marina Bay promenade, Singapore

Economists say the dry spell, also impacting neighboring Malaysia, threatens to push up food prices and slow economic activity.

"It's interesting to note that when weather is dry it tends to have a dampening impact on an economy rather than one that lifts activity," said Vishnu Varathan, market economist at Mizuho Corporate Bank in Singapore.

"People are watching the PSI [Pollutant Standards Index] again so that's also something to watch," he added. "Already I'm told that air purifiers have sold out."

The PSI, a measure of air pollution, on Tuesday rose above 84 -- its highest level so far this year. It was steadily creeping higher on Wednesday with a range of 38-74 for the whole of Singapore, but still well below levels above 300 seen last year.

(Read more: Face masks, anyone? Singapore struggles with haze)

Some businesses that have benefited from the dry weather include those involving outdoor activities.

Isabelle Malique-Park, who runs The Stand Up Paddling School out of Tanjong Beach on Singapore's Sentosa Island, says the business has done well.

"The SUP School activities have been booming (plus 30 percent) since the start of the year, largely due to dry weather," she said. "The haze coming through is less of good news though... if it goes above PSI 100 activities will have to be suspended."

Dry weather hits Singapore's famous Botanical Gardens
CNBC
Dry weather hits Singapore's famous Botanical Gardens

Higher food prices?

According to local media reports, many farms in the region have had to increase water consumption significantly because of the dry weather, raising costs that could be passed onto consumers.

Singapore's annual inflation rate eased to 1.4 percent in January, the lowest in almost four years.

Worries about the impact dry weather will have on palm oil from Malaysia and Indonesia, the world's two biggest producers of the commodity, meanwhile pushed up prices to 18-month highs this week.

"This is a dry period of unprecedented proportion and intensity," said John Baker, CEO of Singapore-based First Agriculture Holdings.

(Read more: Asian cities most at risk of extreme weather)

"The market is definitely factoring in a degree of tightness down the track once this climate event translates into reduced production on the ground, which I am sure it will do," he said, adding that the dry weather had implications for other commodity prices such as rubber.

Analysts said that they anticipated the overall impact on Singapore's economy to be limited for now, partly because the city-state has not yet turned to water rationing as Malaysia did last month.

Singapore's water consumption has gone up about 5 percent during the dry spell but there is no need for water rationing at this point, the country's environment minister said last week.

"Singapore is coping with the dry weather," said Hak Bin Chua, an economist at Bank of America Merrill Lynch (BoAML). "The government had been forward looking when it comes to water supplies and although the dry spell has been long, there's no need for water rationing yet."