SINGAPORE, Oct. 12 (Xinhua) -- The Monetary Authority of Singapore (MAS) said on Monday that it will maintain its current policy of zero appreciation of the Singapore dollar.

    The country's central bank said in a statement that it will continue to be vigilant over developments in the external environment including the medium-term risk of stronger global inflationary pressures for its monetary policy.

    Looking ahead, the central bank forecasts that the Singapore economy is not expected to sustain the strong pace of expansion seen in the second and third quarter.

    While prospects for the external economies have improved, final demand in Singapore's key export markets, including for IT products, has yet to recover decisively, the statement said.

    Significant challenges remain in the transition to private sector-driven growth as governments prepare to exit from their expansionary policies.

    Household spending, particularly in the United States, continues to be constrained by the weak labor market, sluggish income growth, and lower housing wealth. At the same time, businesses also remain cautious in their investment decisions.

    Against this backdrop, it said that the Singapore economy is likely to settle at a more gradual pace of expansion, forecasting that the gross domestic product (GDP) growth in 2010 is expected to be slower than in previous post-recession periods.

    It also said that for the rest of 2009 and into 2010, consumer price index (CPI) inflation will continue to be driven by external factors, especially higher oil and food commodity prices in world markets.

    CPI inflation is likely to be around 0 percent in 2009, before rising to 1 to 2 percent in 2010.

Special Report:  Global Financial Crisis