Singapore to see "sluggish" economic rebound

SINGAPORE - Singapore's economy performed better than estimated in the second quarter, but recovery will be "sluggish" on continued weak demand from the United States and Europe, the government said Tuesday.

The trade-reliant economy expanded by a seasonally adjusted 20.7 percent in the June quarter from the previous three months, better than the estimated growth of 20.4 percent released last month.

The expansion marks Singapore's first quarter-on-quarter growth in five quarters and analysts said this suggests the economy is emerging from its worst recession since independence 44 years ago. It followed a quarter-on-quarter dive of 12.2 percent in the first three months.

Second quarter performance was underpinned by strong gains in the manufacturing sector, where output climbed 49.5 percent compared with the previous quarter's contraction of 18.5 percent.

Manufacturing growth was powered by a surge in the production of active pharmaceutical ingredients used in medicines worldwide and a rise in inventory restocking in electronics.

The construction sector grew 32.7 percent on the back of a resilient property market and the ongoing building of two integrated resorts in the city-state.

However, gross domestic product (GDP) in the three months to June was still down 3.5 percent year on year, the Ministry of Trade and Industry (MTI) said, indicating that any recovery would be fragile.

In the March quarter, GDP shrank 9.5 percent from the same point in 2008.

The MTI noted that industrial production and consumption in Singapore's key export markets such as the United States and Europe are still weak and unemployment remains high.

"Without a turnaround in these demand-led indicators, any economic recovery in the second half of the year will probably be sluggish and modest," the ministry said.

As a result, the government is maintaining its forecast for the economy to shrink between 4.0 and 6.0 percent this year.

"While we are probably past the worst of the economic crisis, we have not fully recovered and we do not expect economic recovery from this severe downturn to be quick," Trade and Industry Minister Lim Hng Kiang said.

Despite the quarter-on-quarter GDP rise, Mr Lim cautioned that "it is too early to cheer as Singapore is an open economy which is dependent on world trade as well as regional and international developments."

In a separate statement, the government's trade promotion body International Enterprise Singapore (IE Singapore) said key exports rose a seasonally adjusted 7.6 percent in the June quarter from the previous three months.

But compared with the previous year, non-oil domestic exports fell by 14 percent on lower shipments of electronics and non-electronic goods, it said.

Total external trade was up 3.8 percent from the preceding quarter but down 27 percent from a year earlier.

Singapore became the first Asian economy to slip into 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.

- AFP

Source: Channel News Asia, 11 Aug 2009