(SINGAPORE) While the full-year growth forecast for the Singapore economy has been hiked sharply after two resurgent quarters, the 2010 outlook is somewhat more subdued, the government says.
The recession may have ended but GDP growth in 2010 is expected to be slower than in previous post-recession periods, says the Monetary Authority of Singapore (MAS).
Advance estimates of third-quarter GDP growth show a 0.8 per cent year- on-year rebound - the first positive number after three negative quarters. The on-quarter sequential growth of 14.9 per cent is also in line with market expectations. And Q2 figures, meanwhile, have also been revised up.
The continued expansion of biomedical and electronics output, and improvements in the trade-related and tourism sectors spurred growth, the Ministry of Trade and Industry (MTI) said yesterday, as it revised the official forecast for 2009 to a 2-2.5 per cent contraction. The previous forecast was a 4-6 per cent contraction.
MAS - which yesterday kept monetary policy unchanged by maintaining its neutral stance on the Singapore dollar - says the economy is not expected to sustain the robust pace of Q2 and Q3, especially with the key export markets yet to recover decisively.
With the global backdrop still highly uncertain, the Singapore economy is 'likely to settle at a more gradual pace of expansion', MAS says.
MTI, meanwhile, also reckons that economic activity will probably remain below pre-crisis levels, and growth in 2010 may well be dampened and uneven.
While 'one-off factors such as restocking activities and fiscal stimulus measures will continue to support growth in the near term', a sustained pick-up in private spending and investment in the developed world is needed to support growth momentum into the second half of 2010, it says.
But the risk of 'a return to recessionary conditions is low in the absence of further financial shocks', it adds.
The cautious tone of the official remarks appears to have rubbed off on some private sector economists, many of whom have been highly bullish of late.
Still, some expect the flash Q3 GDP figures - which are based on only July and August data - to be revised up in due course.
While Barclays Capital took the cue from the Q3 figures to raise its full-year forecast to a 1.5 per cent decline, from minus 2.5 per cent previously, United Overseas Bank (UOB) is staying with its minus 3.3 per cent projection, 'although there could be an upside bias'.
UOB economists believe that the manufacturing sector 'could see some downward pressure in Q4' as it has been largely driven by the volatile pharmaceuticals, and the electronics cluster hasn't recovered.
They also note that the official forecast suggests, at best, a sequential contraction of around one per cent in Q4.
Macquarie Securities' Rajeev Malik says he is maintaining his 2010 GDP forecast of 5 per cent growth.
'The one-off sizeable positive impact of restocking will not be repeated next year and the economy will have to rely more on the below-trend improvement in final demand in the industrialised economies.'
Morgan Stanley's economists, looking at 4 per cent growth in 2010, also believe recovery will be uneven.
Global growth next year will likely be slower than during 2004-2007 at 3.7 per cent, they say. And given the low-labour intensity of the biomedical growth engine, and with 'capex recession' likely to persist for a while yet, 'we suspect labour market conditions are also likely to remain soft'.
DBS Bank's economists say that the September export figures to be released later this week will show some tech payback.
'Fundamentally, it probably reflects the gradual tapering-off in the pace of the global recovery as well as demand. But rather than viewing this as the recovery losing steam, we believe it is consistent with the recovery process and the economy will likely shift towards a steadier and more sustainable pace of growth going forward.'
Daiwa Securities' PK Basu, meanwhile, is looking at 6.7 per cent growth in 2010, following a 0.6 per cent decline for 2009. The key indicators, from electronic output to visitor arrivals, are well on the mend, and the Q3 numbers will be revised up.
And, with the improved economic outlook, the economists also note that MAS has flagged the prospect of higher oil and food prices as inflation risks for 2010.
Source: Business Times, 13 Oct 2009
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