Ahead of next week’s release of flash estimates of the first quarter’s GDP growth, a bit of exuberance seems to have swept over some forecasters, with talk now of 2010 growth exceeding 8 per cent.

DBS Bank economist Irvin Seah yesterday raised his forecast of Singapore’s 2010 gross domestic product growth by one point to 7 per cent on account of an expected robust double-digit Q1 pace.

Advance GDP estimates for Q1 – which the Ministry of Trade and Industry (MTI) will announce next Wednesday morning – will likely show strong 21.7 per cent quarter-on-quarter growth, or 11.3 per cent in year-on- year terms, according to Mr Seah. The surge will be driven largely by capacity expansion in the pharmaceutical industry, a rise in electronics demand as well as continued improvement in services sector growth, he said.

Citigroup’s Kit Wei Zheng has more upbeat forecasts – and even more bullish guesstimates up his sleeve. He reckons that with the economy ‘firing on all cylinders in the first quarter’, Q1 growth likely surged 28 per cent quarter-on-quarter and 14 per cent year-on-year – although Q1 will likely mark the peak of the cycle, as base effects turn less favourable thereafter and restocking momentum fades.

‘But the growth moderation could be gradual, with a double-dip recession not likely,’ he says.

On paper, Citigroup’s forecast of Singapore’s 2010 GDP growth officially remains 6.5 per cent, but Mr Kit believes it ‘could exceed 8 per cent’, with output staying near potential through the year. And that’s even if Q2 sees a marked sequential pullback and growth stays flat in Q3, he says.

He will revise his 2010 forecasts after the Q1 flash estimates are out next week.

Last September, when it wasn’t entirely clear that the recession had run its course, Mr Kit’s Citi colleague, Chua Hak Bin, had already stuck his neck out, saying GDP growth of more than 8 per cent was ‘achievable’ for Singapore in 2010.

In any case, more significantly perhaps, Mr Kit believes GDP levels probably exceeded pre-recession peaks in Q1 – that is, some eight quarters after the previous peak, compared with the previous average of six quarters in earlier recessions.

‘But with the peak-to- trough decline in GDP twice as deep as in past recessions, this implies that the recovery has been much sharper than in past recessions,’ he points out. And this should ‘erase any doubt that this recovery has been V-shaped thus far’.

For other economists, such as Barclays Capital’s Leong Wai Ho, who is looking at 6.5 per cent growth in 2010, ‘concerns on growth quality remain’. Recent growth drivers, he notes, have been the volatile biomedicals and ‘one-time additions to capacity’ – the casino resorts, three vaccine plants, new aerospace facilities and Shell’s petrochemical complex.

The more bullish economists expect the official 2010 growth forecast (which stands at a range of 4.5-6.5 per cent) to be revised up – if not next week, then in May when the final Q1 figures are out.

Meanwhile, the Q1 forecasts colour expectations of the government’s monetary policy stance at its upcoming review next week.

More seem to expect the Monetary Authority of Singapore (MAS) to maintain its neutral stance, given the low core inflation and uncertainties about the second-half outlook.

But Citigroup’s Mr Kit – given his upbeat prognoses – believes ‘the stars are aligned’ for monetary tightening, citing rising inflationary pressures as the output gap closes and grows.

Source : Business Times – 9 Apr 2010

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The Monetary Authority of Singapore’s survey of 20 private-sector economists showed they see average growth of 6.5 per cent this year, higher than the previous forecast of 5.5 per cent in December.

They also raised their outlook for the island-state’s major industries including manufacturing, which is now predicted to expand an annual 9.7 per cent from the previous forecast of 6.3 per cent.

Wholesale and retail trade is seen growing 8.4 per cent instead of 7.0 per cent while construction is tipped to expand 8.9 per cent, from a previous projection of 7.1 per cent.

The government in February upgraded its 2010 economic growth outlook to 4.5-6.5 per cent from 3.0-5.0 per cent. Singapore’s economy contracted 2.0 per cent last year due to the global economic downturn.

Source : Channel NewsAsia – 10 Mar 2010

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In his New Year message, Singapore Prime Minister Lee Hsien Loong said that next year could see 3 to 5 per cent growth.

And observers believe this could result in a move away from manufacturing as the key driver of Singapore’s economy.

After a difficult start to 2009, Singapore’s economy has ended the year on a more cheerful note.

In his New Year message, Mr Lee said that the fourth quarter of 2009 saw GDP climb 3.5 per cent.

However, GDP growth for the full year still stands at minus 2.1 percent.

Current estimates put 2010’s GDP growth at between 3 and 5 per cent, and observers expect manufacturing to play an increasingly smaller role in the economy next year.

Alvin Liew, economist, Standard Chartered Bank, said: “If we look at current trends themselves, and what happens in developed economies in the West, this is clearly not a sustainable picture. To keep a manufacturing base that high… But at the same time, as we move towards a more developed stage in economic development, we are expecting services to play a bigger and bigger role as the economy develops.”

Financial services are among those expected to see the most growth next year, while tourism-linked industries are also likely to improve once Singapore’s two integrated resorts open.

But observers are waiting to see how the global economy unwinds current support packages as this could pose a risk to growth.

Selena Ling, head, Treasury Research & Strategy, OCBC Bank, said: “A lot of the private demand in key economies like the US, and certain parts of the eurozone, and in Japan in particular, it is really relying on government stimulus to keep consumption spending going.

“So once that tails off, you may also see final demand tailing also. That will have implications for manufacturing, especially exports for Asia, including Singapore.”

The private sector has welcomed the return the growth. But business leaders said companies would need to work hard to maintain that growth next year. That is because manpower issues could become a concern as the fast-growing services sector seeks to fill its ranks.

Source : Channel NewsAsia – 31 Dec 2009

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According to some economists, growth could even surpass the government’s estimates for 2010. They are looking at GDP growth of more than 5 per cent, compared to the government’s current forecast of a 3 to 5 per cent growth.

This follows 2009’s roller coaster ride, where the economy took a beating in the early part of the year before recovering in the second half.

Export-dependent Singapore was among the first in Asia to fall into recession towards the end of 2008. The economy contracted by 14.6 per cent on-quarter in the first quarter of 2009, following a decline of 16.4 per cent in the previous three months. Then it took a sharp turn upwards, catching the markets by surprise.

David Cohen, director of Asian economic forecasting, Action Economics, said: “The rebound has been better than expected. The strong growth in the second and third quarter GDP in Singapore was better, at a double-digit quarter-on-quarter annualised rate.

“It was a reflection of the turnaround. It was more or less in line with the pattern around the region where many of the Asian exporting economies, after the sharp fall-off in their production and exports in the beginning of the year, rebounded as global demand started to recover.”

Song Seng Wun, CEO & regional economist, CIMB-GK Research, said: “After a fairly weak start to the year in the aftermath of the collapse of global demand, we saw things improving in subsequent quarters…

“Aggressive intervention by the Singapore government and others around the world stabilised an uncertain environment. When you have heavy government intervention in the economy, it gives confidence back to businesses and consumers as well.”

While the outlook for 2010 appears to be brightening, some said much depends on the United States and when global central banks will cut liquidity.

“Which is why there is much debate on whether governments should withdraw liquidity, withdraw from the economy. It’s probably a bit premature. The risk really is that the number one engine, the US, continues to see patchy recovery,” said Mr Song.

Sector-wise, manufacturing was the worst hit by the downturn in 2009, but it is looking up.

The manufacturing sector, which accounts for about a quarter of the country’s GDP, is expected to grow by about 8 per cent in the fourth quarter this year, after a surprise rebound in the third quarter. This performance is expected to continue into 2010.

Mr Cohen said: “Assuming the global economy remains on recovery trajectory, that should support continued recovery in manufacturing sector and this, including the electronics sector globally, should turn around.

“Perhaps Singapore will still be feeling some drag from the closing of some disk drive production sites, but that should be balanced by the continued uptrend in the pharmaceutical area, where Singapore continues to enjoy an expansion in the global industry that is expected to continue into next year.”

Meanwhile, all eyes will also be on the much-anticipated opening of Singapore’s two integrated resorts. They are expected to add about 0.5 per cent to GDP growth next year, through a boost to tourist arrivals and retail sales.

Source : Channel NewsAsia – 21 Dec 2009

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In the previous survey of professional forecasters conducted by the Monetary Authority of Singapore (MAS) in September, economists had a median forecast of a 3.6 per cent decline in GDP for the whole of 2009.

For the fourth quarter, the 20 economists who responded to the latest survey expect most sectors to continue posting improved numbers.

They expect financial services to return to positive growth of about 9.9 per cent in the last three months of the year, after declining 0.2 per cent in the previous quarter.

They also projected positive numbers for non-oil domestic exports, giving a median forecast of 3 per cent growth, following last quarter’s 7.8 per cent decline in exports.

Manufacturing is expected to grow at a median rate of 8 per cent, after posting a surprise 6.6 per cent growth in the third quarter.

However, director of Asian economic forecasting at Action Economics, David Cohen, cautioned on Wednesday that manufacturing could also surprise on the downside.

“I guess the uncertainty surrounds the manufacturing sector, where we saw a strong bounce in the prior quarters after the weakness at the beginning of the year,” he said.

“But perhaps it was exaggerated by the pharmaceuticals sector, which can be volatile month-to-month, and it could be pulling back in the fourth quarter.”

The 20 economists who responded to the latest survey have also upgraded their forecast for fourth quarter growth.

They now have a median forecast of a 4.7 per cent expansion in the fourth quarter, up from 1.9 per cent in the previous survey. For 2010, the analysts have projected the economy to grow by 5.5 per cent.

Source : Channel NewsAsia – 9 Dec 2009

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OCBC said the economy is expected to grow 4 per cent in 2010 – at the mid point of the government’s official forecast of 3-5 per cent expansion.

However, concerns are mounting about asset bubbles and rising inflation.

The problems currently facing Dubai World have been isolated so far. But observers expect similar “speed bumps” to show up over the next few years, suggesting that the global economy is just slowly recovering.

For Singapore, OCBC said the economy is expected to grow on-year in the fourth quarter and at least in the first half of 2010, barring unforeseen events.

Economists said there is lingering policy concern on potential asset bubbles, including the property market. And they expect the opening of the two integrated resorts next year to generate more demand for homes from foreign workers and investors.

Selena Ling, Head, Treasury Research & Strategy, OCBC said: “Mainly because of the record low interest rates we are seeing in the G3 economies, a lot of money has been sitting on the side lines in the wake of Lehman Brothers.

“Obviously with the pick up in economic numbers, the risk appetite is coming back. They are all searching for yield and emerging markets like Asia, because we have been relatively less impacted by financial deleveraging process (and it) does look relatively attractive from a medium term point of view.”

OCBC said investors will continue to buy into the commodities and China growth stories. It said the key concern now is not a double dip but rising inflation and slow expansion, as energy prices and wages rise.

OCBC also expects the Singapore dollar to appreciate, if recovery in the economy and export stays on track.

“The countries that are highly exposed to the global export cycles, the Taiwan dollar, Singapore dollar, the Malaysian ringgit… (they) are expected to play some catch up in 2010, to other currencies that have strong domestic growth dynamics,” said Emmanuel Ng, Currency Economist, OCBC.

“So we do expect some catch up by the Singapore dollar next year, especially if the MAS tightens policy,” he added.

The Monetary Authority of Singapore is due to review its Singapore dollar policy in April 2010.

Source : Channel NewsAsia – 1 Dec 2009

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They say the three per cent outlook given by Minister Mentor Lee Kuan Yew on Sunday may be on the cautious side, but it is still news they welcome as this means better times are ahead – more so in industries such as the finance sector.

“There will be a pay revision. Estimates in general range from about two per cent to about 4.5 per cent,” said Gary Lai Wai Keat, manager of Financial Services at Robert Walters. “If you look at the front line business, you talk about bonuses being restored.

“I think most of the bonuses that were cut is probably in the range of 60 per cent to 80 per cent. This year, you will get at least half of that coming back into the picture.”

Halimah Yacob, deputy secretary-general of NTUC, said: “With economy on the growth, it means workers can expect at least some bonuses and wage increases, compared to this year where many did not have wage increases, and many did not get their mid-year bonuses.

“We really do hope that with the three per cent projected growth, that would actually bring benefits to workers in terms of more job openings and some wage adjustments and bonuses that they can expect.”

However, analysts expect employers to remain cautious and adopt a wait-and-see approach when it comes to pay increments and bonuses for certain sectors such as manufacturing

“It will still be riddled with uncertainties, one of which, whether there will be an overhang in capacity,” explained Vishnu Varathan, a regional economist. “And to that extent we will not probably see a very broadbased upside to salaries and it may be better for the medium term if there’s a period of stabalisation and gestation, just simply due to the amount of uncertainty that is out there.”

But as the recovery takes shape, there are still traps lurking, which policy makers need to pay attention to.

Varathan said: “Over the next few months, there will be talk about exit strategies, to what extent and what pace will some of these policies begin to unwind. This is one of the risks that someone moves too fast or too slow and that’s going to cause de-stabalisation.

“You also see huge flows coming into this region and propping up the asset markets and partly due to dollar debasement fears as well. That, of course, is a very unsettling thing when the fundamental economies are at a very nascent stage of the recovery.”

Lai said: “Credit card debt is also being considered as the next big thing, whether the banks will have a much higher NPL (non-performing loans) going forward. Whether banks have accepted TARP (Troubled Asset Relief Programme) money and, if they can recruit talented people to join. These are things which going forward probably affect trade.”

Besides economists looking to a better year ahead, global leaders at the APEC Forum will also be looking at better understanding what the new world-economic order means for the region.

Source : Channel NewsAsia – 9 Nov 2009

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Speaking at the annual tree planting ceremony at his constituency of Tanjong Pagar, Mr Lee said Singapore has emerged out of the recession with minimum damage.

He said the first quarter was the country’s worst period with a sudden drop in exports, and at that point of time, Singapore had expected growth to shrink by up to nine per cent.

However, the country’s economy has bounced back in the second and third quarters this year.

Mr Lee added that Singaporeans must be prepared for slower economic growth, but said that slower growth in the nation and other countries in Asia will still be higher than other regions of the world.

“We have a small population, and we must find ways and means to fill up the drop in our exports,” Mr Lee explained. “Fortunately, we have gone into industries like pharmaceuticals that have not been so badly affected by the slowdown.

“We are placed at the junction of three big economies that are not export-dependent, in other words, exports are not a high proportion of their GDP. They have huge domestic markets: China with 1.3 billion people; India 1.1 billion; Indonesia 250 million. Their domestic consumption and investments have enabled their economies to continue achieving positive growth despite a slowdown in exports.

“The rest of East and Southeast Asia have the benefit of the overflow effect from China, India and, to a lesser extent, Indonesia. Furthermore, we have free trade agreements with China and India that will give us an advantage over other regions.

However, Mr Lee added that there are bigger issues at stake.

The Prime Minister said: “If every time we run into a problem and the younger generation has grown up for the last 20, 30 years knowing only improvements in life, more income, better surroundings, better everything… that’s a problem.

“They have not understood how difficult life was when we started and how easy it is to go back to that situation if we do not work together and strive and make this place successful.”

Mr Lee also said to ensure that Singapore remains as one of the best liveable cities in the world, the country needs an honest and capable government which can think and plan long term.

One of the challenges now is to find the next generation of Members of Parliament (MP) and leaders who can continue with what the present government is doing.

Mr Lee added that it is important to choose the right leaders and not just listen to what the opposition says.

“Come election time, they talk a lot of things, which is rubbish,” said Mr Lee. “This is a government which chooses its MPs very carefully, test them out before they become Ministers, that’s why it is working. The present Ministers can last ten years…”

Mr Lee added that by the next general election due by February 2012, Singapore will see the nucleus of a new generation of leaders who are as able, determined and committed.

In that way, Singapore will remain healthy, strong and at peace.

Source : Channel NewsAsia – 8 Nov 2009

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Mr Lee was giving his assessment on the global economic outlook ahead of the Asia Pacific Economic Cooperation (APEC) meetings, which will take place in Singapore.

The prime minister noted that most countries are out of the “trough of spasm” that was experienced at the start of the year, and said Singapore is at a stable position.

That’s because of quick government response to the financial meltdown, and measures by the US to strengthen its banking and financial systems. In Asia, Mr Lee noted, China and India have helped to drive growth.

Earlier this year, some economists believed that Singapore might experience a W-shaped recovery — meaning a second dip after this initial bout of recovery.

It is the first time Mr Lee has said that he believes a second recession in Singapore is unlikely for now.

He said the preliminary 0.8 percent year-on-year economic growth in the third quarter this year was “nothing to be proud of, but something to be grateful for”. The government’s GDP forecast for the year is now at minus 2.5 to 2 percent.

But he said the outlook remains uncertain as governments start to withdraw their stimulus packages, adding that he does not expect a dramatic recovery.

Mr Lee said: “You have to deal with the imbalances. Americans have to save more. Asians have to spend more, either investment or consumption and financial system problems have to be sorted out.

“All the toxic assets that pre-occupy us not many months ago, which have disappeared from the headlines now, I think they will gradually come to fruition and you must decide how will they be recognised? On whose accounts will they be on? And which institutions will have to take the hit and what happens then?

“Therefore, I don’t see a rapid, dramatic expansion back. At best, a steady gradual recovery, giving us time to sort these problems out.”

It is against this backdrop that leaders from the 21 Asia Pacific economies will meet from Sunday. Mr Lee said their talks will therefore focus on longer term issues that will “foster growth in the region”.

Even as economies like the US proclaim “buy-local” policies to protect domestic markets, APEC leaders are expected to push for what they call, “inclusive growth”.

Mr Lee said: “Because of the integration of the APEC economies…..we have generated prosperity. And if you want that to sustain, you can only do that if there is a political consensus. And to have a political consensus, the benefits of growth have to be enjoyed not just by a minority of lucky ones or rich ones but a broad majority of population including a broad middle group of ordinary people.”

APEC’s 2009 theme is “Sustaining Growth, Connecting the Region”. Hence, other issues leaders will discuss include “sustainable growth”, that is issues related to climate change and energy efficiency as well as “balance growth”, that is dealing with reforms to reduce the imbalance in savings and investments.

Leaders are also expected to push for further regional economic integration by advancing free trade within the Asia Pacific. And since this will be US President Barack Obama’s maiden APEC meeting, all eyes will be on the message the US commander in chief will deliver when he meets his Asian counterparts.

For the first time, there will be a US-ASEAN meeting on the sidelines of APEC.

Prime Minister Lee said: “Our message to him (Mr Obama) is the US has many friends and many interests in the region. We welcome them as a partner and we hope that we will be able to strengthen the relationship with the US and they will play a major role in the Asia Pacific.

“And I hope his (Mr Obama) message to the region is he will want the US to play this role and they will be engaged not just on trade but also on economic cooperation as well as security, cultural issues. It will be a broad engagement.

“We know he (Mr Obama) has many preoccupations. He has domestic preoccupations (like) healthcare. Internationally, he has many worries – in Iran, in Israel, Palestine, Afghanistan. He has a big decision to make and even within the Asia Pacific, he has got North Korea to worry about. But beyond all these worries, there are long-term interests which we pay tending and attention.”

Mr Lee noted that the APEC meeting is also an opportunity to showcase Singapore. A Singapore Evening, to be held at the Esplanade, is being planned for delegates to soak in the sights, sounds and taste of Singapore.

He said: “We have many guests in town, and as they say in Chinese, ‘you peng zi yuan fang er lai’. We should be very pleased we’ve got many friends from far away and let’s show them what Singapore can be.

“Let’s be a hospitable host, whether you’re a taxi driver, whether you’re a staff in the hotel, whether you’re a stranger who is asked for directions in the street, whether you’re just going about your business and inconvenienced because the APEC convoy has zoomed by and left you standing in a traffic jam, please do your part and show them what Singapore can do.”

Unlike previous international events held in Singapore, the APEC meetings will be held in at least two venues, most of them at the Suntec Convention Centre in downtown Singapore. The leaders’ meeting will be held at the Istana.

Source : Channel NewsAsia – 3 Nov 2009

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The economy soared 20.4 per cent in the three months to June compared with the first quarter on a seasonally adjusted annualised basis, the Ministry of Trade and Industry said, while raising its forecast for 2009.

A Dow Jones Newswires poll of 10 analysts had tipped an average 14.1 per cent economic expansion.

Gross domestic product (GDP) was now expected to contract 4-6 per cent for the year from an earlier projection of 6-9 per cent, the ministry said, while warning that any recovery would be weak due to the fragile global economy.

It was the first quarter-on-quarter growth in five quarters.

Trade-driven Singapore became the first Asian economy to slip into a recession in the second half of last year after a financial and economic crisis that started in the United States hit demand for its exports.

Tuesday’s data means Singapore is the first of the Asian countries hit by recession to release statistics pointing to a recovery.

Compared with the previous year, however, output in the June quarter was down 3.7 per cent, indicating that the economy remained weak.

“I guess technically the recession would have ended, the economy is growing again,” said David Cohen, an economist with research house Action Economics.

“Growth won’t be very strong but it should remain in an upward trajectory,” he told AFP.

“The Singapore economy registered a stunning turnaround in the second quarter, much in line with our expectation,” DBS Group said in a research note.

Despite the quarter-on-quarter growth, the trade ministry cautioned that “the outlook for the rest of the year remains largely unchanged: of a weak recovery susceptible to downside risks.”

“At this juncture, there is no evidence yet of a decisive improvement in final demand,” the ministry said in a statement, adding the second quarter surge “may not be sustained.”

The services sector, which accounts for two-thirds of the economy, continued to shrink with a decline of 5.1 per cent in the June quarter from a year ago, the ministry said.

It noted that rising unemployment and reduced consumer spending in Singapore’s major export markets like the United States and Europe reflected the continued weakness in the global economy.

Action Economics’ Cohen said however he was cheered by the second quarter numbers.

“I think this will be the first in a series of upbeat GDP reports for the second quarter from Asian economies,” he said, noting that China and South Korea would also be announcing their growth data in the next two weeks.

“Maybe this will provide some reassurance to the markets which have been jittery in the last few weeks about the sustainability of the recovery. It shows that Asian economies have turned the corner in the second quarter.”

Dariusz Kowalczyk, chief investment strategist with SJS Markets trading house, said the June quarter data suggested Singapore may not have been as hit hard by the global recession as initially thought.

“Production and exports account for such a large proportion of the Singapore economy that global trends will determine whether it grows or contracts but I am upbeat on the global economy so this bodes well for Singapore,” he said.

He added that he has revised the city-state’s 2009 growth outlook to a contraction of 4.3 per cent from 5.9 per cent previously forecast.

The June quarter figures are computed mainly from the April-May period and the ministry is expected to release a more detailed picture in the next few weeks.

Source : Channel NewsAsia – 14 Jul 2009

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