Singapore. The chief of Singapore's central bank warned on Wednesday (04/07) that risks to the global growth outlook have increased significantly thanks to an intensifying international trade row and the rising prospect of a rapid acceleration in inflation.

Yet Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), also said the baseline forecast for the city-state is for the economy to continue expanding and inflation to pick up gradually, adding the MAS "does not aim to pre-empt tail risk [least likely] scenarios."

"Tail risks to global growth have grown significantly over the last six months," Menon told a news conference after the release of the central bank's annual report.

"The world has clearly moved from trade tension to trade conflict. If this escalates into a trade war, all three engines of global growth – manufacturing, trade and investment – will stall."

The comments come in the wake of renewed threats by the US administration against global trade partners and President Donald Trump's warning on Monday to take action against the World Trade Organization.

The consequences of a full-out trade war and disruptions to the WTO process will be "quite dire," Menon said.

"There is little question about it. The paralysis of trade flows will not stop at just trade, it will extend to investment, confidence across a range of economic activities."

"While the central prognosis for the Singapore economy this year remains intact, spillovers from global trade conflicts bear close watching," he added.

In April, Singapore's central bank tightened monetary policy for the first time in six years, tweaking one of three variables in its exchange-rate based model.

Menon said the MAS has started a monetary policy normalization but the approach was to do so incrementally in view of modest inflation and rising trade-related tail risks.

"Further adjustments to the monetary policy will depend on how the economy evolves and our updated assessments of inflation and growth prospects," he said.

Singapore is seen as a bellwether for growth because international trade dwarfs its economy. Exports, for instance, equate to about 200 percent of its gross domestic product.

Overall, Singapore's GDP growth is expected to come in at around 2.5 percent to 3.5 percent in 2018, the MAS said, adding that the outlook remains positive overall.

Analysts are split over whether April's move is the start of a longer-term tightening of monetary policy. The MAS's next scheduled policy statement is in October.

Menon said the property market has seen a resurgence in prices and transactions over the past year. "The recovery in the property market is welcome but it should not decouple from economic fundamentals."

Prices in Singapore's private home market rose for the first time in four years in 2017, though it was a modest 1.1 percent.

Reuters