Singapore’s economic growth has slowed sharply in the first three months of the year, but the central bank has stood pat on monetary policy, saying it would be lifted by a pick-up in global growth.

Preliminary estimates showed the city-state’s trade-reliant economy expanded a seasonally adjusted 0.1 per cent quarter on quarter, the trade ministry said on Monday. That compared with 6.1 per cent expansion in October-December.

The ministry said growth was hit by a 1.8 per cent quarter-on-quarter contraction in the services industry.

The advance gross domestic product (GDP) estimates are based on two months of data, but is given out as a preview to the trade-sensitive economy’s performance during the quarter.

On a year-on-year basis, GDP is estimated to have expanded 5.1 per cent in the first quarter, slower than the 5.5 per cent rise in the final three months of 2013.

The city’s central bank, the Monetary Authority of Singapore (MAS), forecast growth of 2.0-4.0 per cent for 2014, against 4.1 per cent last year.

Manufacturing rose 4.5 per cent from the preceding quarter and 8.0 per cent year-on-year because of a strong rebound in the output from the biomedical and chemical segments, the trade ministry said.

Construction remained strong, expanding 10.7 per cent from the previous quarter as the government ramped up infrastructure projects. The sector was up 6.5 per cent from the previous year.

Despite the first quarter slowdown, the MAS said it would maintain its policy of allowing for a “modest and gradual appreciation” of the local dollar as the global economy improves.

Singapore uses the exchange rate rather than interest rates to contain inflation as the city-state imports almost all of its needs.

The MAS said in a separate statement there would be no change to the slope of an undisclosed band at which the Singapore dollar is allowed to move and to the level at which the currency is centred.

“The policy stance is assessed to be appropriate for containing domestic and imported sources of inflation, and ensuring medium-term price stability as a basis for sustainable growth,” the MAS said.

“The outlook for the global economy has brightened,” it added, pointing to improving prospects in the US, European Union and Japan.

“Notwithstanding the weak growth outturn in the first quarter, the level of economic activity should stay in a broad upward trajectory for the rest of the year.”

The central bank forecast this year’s overall inflation rate at 1.5-2.5 per cent.