Singapore's economic activity should gradually pick up over the course of 2013 as the global environment improves, the Monetary Authority of Singapore said in its semi-annual economic review on Tuesday.

GDP growth is projected to come in at 1-3 percent for the whole of 2013. The source of growth will be more balanced between internal and external drivers, the MAS said.

Nevertheless, the central bank said risks to the growth outlook remain. "Lingering uncertainties from outstanding fiscal issues in the US and the potential for policy missteps in the Eurozone could jettison the nascent turnaround in global business and consumer confidence," it said.

Further, the central bank said the tight labor market could lead to higher wage growth, and in turn will support household expenditure.

The labor supply growth is forecast to moderate, due to the continued tightening of the foreign labor policy. As a result, firms will turn to locals to fill job vacancies, lifting resident wages at a faster pace across all sectors.

Labor demand, at the same time, is forecast to pick up moderately as the economy gradually recovers from the mild contraction seen in the first quarter, MAS said.

RTTNews