Economists say Singapore’s GDP growth likely to rebound in Q1

Singapore’s economy is expected to see a rebound in the first quarter. Economists are forecasting GDP to expand by some 6.8% on year, swinging up from the 4.8% decline in the previous three months.

They said the boost will come from a rebound in the pharmaceutical and electronics manufacturing sector. But going foreward, they expect growth numbers to go downhill.

The construction sector is one of the main pillars of Singapore’s growth so far this year. Together with manufacturing, the construction sector is holding up the first quarter’s rebound, according to economists.

Irvin Seah, economist with DBS Group Research, said: “The only bright spark in the economy will probably be the construction sector. The construction sector has been growing at about 20 per cent so far last year.

“And with healthy pipelines of projects coming up – for example the two IRs (integrated resorts), MRT line, Marina Bay Financial Centre and facilities for the Youth Olympics in 2010, we have a very healthy pipeline of mega projects – that will continue to power this sector in the next couple of years.”

Kit Wei Zheng, from the Asia-Pac Economic and Market Analysis unit at Citicorp Investment Bank, said: “The key source of rebound will come from the manufacturing sector.

“We saw manufacturing growth in the first two months of the year rise to 11.4 percent from just 0.2 percent in the fourth quarter last year. This is largely a function of a large rebound in pharmaceuticals, which surged more than 60 percent in January this year.

“The second source of strength (in relation to manufacturing) will come from trade related services.”

Economists are also expecting to see some good numbers from the services sector, which is seen as a reliable pillar of growth despite a slowdown in the financial services sector.

Seah said: “The services sector is likely to continue to remain a stable, reliable pillar of growth. But we do see moderations in service sector growth, led by the financial services sector.

“(This is due to) risk aversion and equity tightness in the sector. Investors’ risk appetites have diminished and that will slow down financial services activity drastically.

“The property market has also slowed down recently and that means lower housing loans. The business services sector will also see slower growth going forward.”

Economists warned that the going will get tougher in the next few quarters due to a cooling global economic climate, where the electronics sector is expected to bear the brunt of a slowdown in US consumer spending.

But rather than call it a recession, some prefer the term “cyclical speed bump”.

Kit said: “It’s a strong start to the year, but it may be what we call a calm before a storm. We now expect a protracted US recession and growth in other major industrial economies will continue to slow. In Asia, we expect China to register growth of 9.8 percent – the first under-10 percent growth in more than five years.

“(Against) this backdrop of slowing global economy, we expect more headwinds for Singapore exports. We expect that the electronics sector in particular, to bear the brunt in the slowdown of US consumer spending.

“Having said that, we are not expecting a recession but a cyclical slowdown. Our forecast for the full year stands at 4.7 percent, which you can call a cyclical speed bump rather than a recession. If you compare it to the last US recession in 2001 when economy contracted more than 2 percent, I think this is a relatively decent performance.

“Why we are relatively confident comes from three key sources of resilience. The first is the manufacturing sector has basically diversified and there is less dependence on electronics.

“We have seen the share of electronics in total GDP fall from around 12 percent in the last recession to around 7 percent currently. At the same time, sectors less sensitive to US business cycle have increased their share of GDP.” For example, the biomedical and transport engineering sectors now account for about 10 percent of GDP.

The government will release advance estimates of first quarter growth on April 10. – CNA /ls

Source : Channel NewsAsia – 9 Apr 2008

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