Tuesday, August 11, 2009

GDP may grow up to 1.8% in Q3: survey

Construction sector shows least pessimism

(SINGAPORE) Business confidence is on the mend. All indicators of the latest BT-UniSIM Business Climate Survey trended upward in Q2. And, the survey's results predict that Singapore's GDP will stage a turnaround with growth of up to 1.8 per cent in the third quarter.

The survey, now in its 14th year, polled 173 companies here in early July on their business prospects for the coming six months, as well as sales, orders and profit performance in the second quarter.

The business prospects indicator, in particular, has been found to be closely correlated to the GDP growth rate in the following quarter. Survey director Chow Kit Boey said that correlation now predicts GDP growth of between 0.8 and 1.8 per cent on a year-on-year basis in the third quarter.

That would signal the recession's end after three quarters, as GDP began contracting in Q4 last year. 'If this materialises, then the latest recession has the same duration as that in 1998 (caused by the Asian financial crisis), is less widespread, but is more intense in terms of the rate of contraction in GDP,' Ms Chow observed.

Today, the Ministry of Trade and Industry is expected to announce a slight downward revision to advance estimates of a 20.4 quarter-on-quarter rise and 3.9 per cent year-on-year contraction in GDP, in the second quarter.

Waning pessimism has already been seen in the results of recent business expectations surveys conducted by government agencies for both manufacturing and services sectors. Results from the BT-UniSIM survey in Q2 painted a similar picture.

It found that a net balance of 28 per cent of companies polled saw business prospects deteriorating further in the second half of this year. This was a 29 percentage point improvement over Q1's negative 57 per cent. The net balance is the difference between the proportion of positive and negative responses polled.

Ms Chow noted that the business prospects net balance indicator has in fact retreated to the negative 25 per cent level recorded a year ago in Q2 2008.

Improved sentiment was widespread, regardless of size and ownership of firms and the markets they do business in.

Firms were, however, marginally less pessimistic about business prospects overseas than locally. 'This is probably owing to the better performance of some Asian countries,' Ms Chow said.

Activity indices - sales, profits and orders or new business, all halted their decline in the second quarter, the survey showed. But contraction continued, as indicated by negative net balances.

The overall net balance for sales and profits rose three points each from the first quarter to reach minus 54 per cent and minus 55 per cent respectively. The net balance indicator for new orders too, rose four points to reach minus 62 per cent.

'The implication is that business activities may start to pick up in the third quarter,' Ms Chow said.

Breaking down the firms surveyed by the sector they belong to, Ms Chow said that the construction sector emerged the 'star performer' for a second consecutive quarter.

Large firms in the construction business posted the best performance across sectors for all indicators, registering the lowest contraction in sales, profit and orders, as well as the least pessimism.

Among small firms, those in financial and business services posted the best profit and new orders performance, while small commerce firms were the least pessimistic over business prospects.

In a supplementary section on geographic markets, the survey asked firms to indicate the country which they view as having the best prospects in their line of business for the coming year.

Overall, China was cited as having the best prospects, while Singapore's domestic market held the second best prospects for firms. Compared to a year ago, optimism over business prospects in China has risen, while the outlook for prospects in Singapore has dimmed slightly, the survey found.

Malaysia and Indonesia were jointly third placed. Malaysia was popular among large and local firms, while Indonesia was viewed favourably by small and foreign firms.

Two other countries - the US and India - made it to the top three rankings among a significant num-ber of firms.

Other countries mentioned included Vietnam, Australia, Thailand, UAE, Japan, Philippines, South Korea, UK, Germany, Mexico, Taiwan and Saudi Arabia.

Source: Business Times, 11 Aug 2009

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