A HIGHER official growth forecast may be on the cards next Monday when the Government is expected to announce that the economy continued to expand strongly in the third quarter.
Economists have upgraded their own forecasts recently as signs of a recovery grow firmer, and are predicting that growth for this year will come in well above the Government's current forecast of -6 per cent to -4 per cent.
Singapore bounced out of recession in the second quarter with a spectacular 20.7 per cent jump in quarter-on-quarter growth, and most economists expect this double-digit growth momentum to have continued in the third quarter.
Some also believe growth for the quarter will come in positive in year-on-year terms - the first time since Singapore officially slipped into recession in the second quarter of last year.
Since June, factories have produced more than expected for two months in a row, due to a surge in demand for pharmaceuticals. Home sales have also been booming despite the downturn.
'There are clear signs of a broadening recovery,' said Citigroup economist Kit Wei Zheng.
Mr Kit tips that the economy grew 21 per cent in the three months to Sept 30 over the previous quarter and that the full-year contraction may be a relatively benign -0.5 to -1 per cent shrinkage.
Apart from manufacturing, which makes up a quarter of the economy, the construction sector has stayed robust and services - two-thirds of the economy - is starting to look healthier.
Financial services has been boosted by strong stock market turnover, a recovery in business loans and healthy home loans, said Mr Kit. The slump in trade-related services has bottomed, while tourism is also improving, with visitor arrivals in August showing the smallest year-on- year decline so far this year.
Both Mr Kit and OCBC economist Selena Ling believe there is a 'good chance' the Government will raise its growth forecast on Monday to -3 to -2 per cent.
'Obviously -6 to -4 per cent no longer looks realistic,' said Mr Kit.
Standard Chartered economist Alvin Liew is a bit more cautious.
'We do expect improvement in the third-quarter numbers, so we would definitely be expecting some revision to this year's growth forecast from the Government, although we won't see it significantly pushed up.' He thinks the forecast may be bumped up slightly to -5 per cent to -3 per cent.
But the economists all warned that the strong growth momentum so far may not be sustained for long.
Yesterday, the Purchasing Managers Index - an indicator of future manufacturing production - showed a dip last month for the first time since April. But the index was still over 50, which meant that factory output continued to expand.
Ms Ling noted that apart from drugs production, other manufacturing sectors remain weak and are mostly still in negative territory.
Electronics is still contracting year-on-year, although at a slower pace, and there is no clear sign as yet of a strong recovery in export demand in most manufacturing industries, she said.
The surprising pick-up in factory production so far could have been largely due to inventory restocking, added Mr David Cohen, an economist at Action Economics. 'There's still some nervousness over whether final demand will continue to pick up.'
Any sustained export recovery will depend on American consumers bouncing back to their feet, which is unlikely to happen any time soon, said Credit Suisse economist Joseph Tan.
Households have had their wealth eroded with the fall in home values while, at the same time, their incomes are also in danger as more people lose jobs, he said.
Closer to home, the gradual withdrawal of stimulus measures such as the Jobs Credit scheme next year may also dampen growth momentum, said Mr Kit.
'The extent to which growth slows in subsequent quarters will hinge not just on the trajectory of the global recovery, but also on the success of the two integrated resorts to be opened next year,' he said.
The continued uncertainty over the economy's journey to recovery means that the Monetary Authority of Singapore (MAS) is likely to maintain its current neutral stance on the Sing dollar when it issues its twice-yearly monetary policy statement, also on Monday.
Economists expect the MAS to return to its previous policy of gradual appreciation of the Sing dollar only in April, when its next monetary policy statement is due, or in October next year.
Source: Straits Times, 6 Oct 2009
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