Economists predict smaller 3.6% decline

Optimism over economy rises but hospitality and retail sectors look bad

ECONOMISTS here are now more optimistic about Singapore's economic prospects amid some signs a global recovery is poised to get into full swing.

A new survey has found these private sector economists expect, on average, that economic output, or gross domestic product (GDP), this year will shrink just 3.6 per cent from last year.

This means they expect a stronger showing than even the top end of the Government's forecast for a contraction of between 4 per cent and 6 per cent.

A quick rebound may even be on the cards as the 21 private sector analysts, surveyed by the Monetary Authority of Singapore, see the economy back in positive territory by the end of the year.

Still, a closer look at the survey numbers reflects mixed views among those looking into their crystal balls. They expect key sectors such as manufacturing, financial services and construction to improve strongly. But they have cut forecasts for wholesale and retail trade and the hospitality sector, reflecting lingering doubts on global consumption.

Their full-year GDP estimates range from a slide of 1.8per cent to a slide of 5per cent. For manufacturing, predictions spanned a 3per cent expansion to a bleak 10.9per cent slump, averaging a 7per cent contraction.

But while they may agree to disagree, they are broadly convinced the worst is over. 'Singapore is latched onto the global economy and we have bounced back stronger than other countries,' said DBS economist Irvin Seah.

With countries in Asia and Europe beginning to emerge from recession, he added that 'the strong economic data from around the world is showing that the worst is clearly behind us and we are on the path to recovery'.

Three months ago, the same survey came up with a 6.5per cent GDP plunge.

But the surprise 20.7per cent rebound in second-quarter GDP from the first quarter lifted Singapore out of its deepest recession in history after just four quarters.

The first hint of the rebound emerged in an unexpected jump in drugs output. Economists like HSBC's Robert Prior-Wandesforde say the bright spots are spreading to sectors such as electronics.

Exports, the economy's lifeblood, are still set to decline, but by 11.5per cent, not 14.1per cent, as trade flows gain traction, they believe.

Some economists, like OCBC's Selena Ling, who has kept her full-year forecast at minus 4.6per cent, remain cautious.

'The mixed data findings show that people are not convinced of a consumption story yet,' she said.

There is still much uncertainty about the sustained recovery in global demand with personal savings in the United States still rising. 'If the US consumer is not spending much, then Christmas won't be that fantastic.'

Just last month, the Trade and Industry Ministry's second permanent secretary, Mr Ravi Menon, warned that Singapore's growth outlook would remain weak as US private consumption has yet to pick up.

DBS' Mr Seah, who expects a 3per cent GDP slide this year, also warned against excessive optimism, pointing to a recent dive in China's equity markets.

The economists expect growth of 4.5per cent for next year, up slightly from the previous forecast.

They lowered their unemployment forecasts for this year to 3.8per cent, as government policies have proven effective at keeping retrenchment low.

Source: Straits Times, 3 Sep 2009