SINGAPORE: Singapore's economy grew faster than expected in the second quarter. Growth came in at 20.7 per cent on year, better than the initial estimate of 20.4 per cent announced by the government in July.
The growth snaps four straight quarters of contraction, but the government has warned that the recovery will be neither quick nor strong.
The volatile biomedical sector gave the Singapore economy a shot in the arm in the second quarter. Greater inventory restocking in the electronics cluster also helped to push the growth figures upwards.
Output in the key manufacturing sector during the three months to June jumped by 49.5 per cent after falling 18.5 per cent in the previous quarter.
The data suggests that the worst may be over, but government officials said it is uncertain if the strong performance can be sustained into the second half.
Ravi Menon, Second Permanent Secretary for Trade and Industry, said: "It is hard to predict production decisions in pharmaceutical plants, especially if they are not driven by external demand factor, or inventory behaviour in electronics.
"The fundamental weaknesses in final demand in advanced economies are likely to constraint the pace of recovery in regional and domestic economies."
The government expects the subdued recovery in the second half of the year to continue into 2010. But for now, there is no need for an extra stimulus package to prop up the economy.
The government is also maintaining its forecast that the economy will contract between 4 and 6 per cent for the whole year.
On Saturday, Prime Minister Lee Hsien Loong said in his National Day message that the Singapore economy contracted by 6.5 per cent in the first half of the year.
Analysts said the Singapore economy is likely to grow at a more realistic pace of single digits in percentage terms in the next two quarters. They noted that downside risks remain, including asset price inflation.
Tai Hui, regional head of research at Standard Chartered Bank, said: "Our suggestion or proposition is not necessarily to hike rates aggressively for now, but rather find ways to reduce the amount of speculation in the markets.
"This could be via fiscal measures such as withholding tax or property gain tax, or to ringfence the real economy from the financial market volatility - for example, better investor protection as well as trying to reduce the real economy's exposure to the ups and downs of interest rates and the stock market.
A sustained pickup in US consumption is also seen as key, while China will also feature significantly.
DBS Bank economist, Irvin Seah, said: "Asia enters the recession in a significantly stronger position. Based on the data that we have for the first half of this year, China has already surpassed the US as our largest non-oil domestic market."
On the jobs front, Singapore's unemployment rate stood at 3.3 per cent at the end of June. But the government does not rule out further retrenchments in the second half, given the subdued economic outlook.
The Ministry of Trade and Industry said employment contracted by 12,400 in the second quarter, double the losses of 6,200 a quarter ago.
Source: Channel News Asia, 11 Aug 2009
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