The Singapore dollar is somewhat weaker than its medium-term equilibrium level but is likely to appreciate as the domestic economy expands, the International Monetary Fund said on Friday.

In its annual review of Singapore's economy, the IMF said the modest and gradual rise of the Singapore dollar SGD= appears consistent with internal and external stability.

The Fund forecast that Singapore's economy will expand by 10 percent in 2010 before easing to 4.9 percent next year. this is lower than the government's projection of a record 13-15 percent growth for 2010.

The IMF said monetary policy settings are broadly appropriate in Singapore although it cautioned that the rise in inflation may require changes in monetary policy. (Reporting by Lesley Wroughton; Editing by Padraic Cassidy)