S'pore takes off: 13.1% growth in first quarter

Full-year forecast raised to 7-9%; PM says it is a remarkable recovery

THE economy has staged 'a remarkable recovery' from the downturn, and Singapore should make the most of the favourable momentum to bolster long-term plans, Prime Minister Lee Hsien Loong said in Washington yesterday.

Commenting on news of the economy's stellar growth of 13.1 per cent in the first quarter and the Government's new projection of 7 per cent to 9 per cent growth for this year, he said: 'Nobody a year ago would have imagined that we would have come out and picked up so fast.

'But it's really a rebound from the downturn last year. We are lucky it's turned out to be more like a V-shaped recovery rather than an L-shaped recovery.'

Aside from hiking its 2010 growth forecast, the Government yesterday also made a surprisingly aggressive move to let the Singapore dollar appreciate to fend off inflation fears.

Markets responded enthusiastically. The Straits Times Index rose 1.6 per cent to breach the 3,000 mark for the first time since June 2008, while the Singapore dollar hit a 20-month high against the United States dollar.

The Ministry of Trade and Industry (MTI) upped its growth forecast from the previous 4.5 to 6.5 per cent for the year, after its estimates showed that the economy's rebound accelerated sharply from January to March, driven by a massive surge in manufacturing.

Compared with a year earlier, the economy grew by 13.1 per cent in the first quarter - the biggest gain in 16 years.

But compared with the quarter immediately before it, the economy expanded by a staggering 32.1 per cent - the highest since records began being kept in 1975.

Describing first-quarter growth as 'exceptionally strong', the MTI said the outlook is looking better for global and regional economies for the rest of this year. While risks remain in the global economy, 'these have been outweighed by stronger signs that global economic conditions are improving', it said.

But with a heartier rebound now on the cards, inflation is also expected to rise, prompting the Monetary Authority of Singapore (MAS) to tighten monetary policy aggressively.

Mr Lee spoke to the Singapore media after attending a 47-nation meeting on nuclear security in Washington.

He cautioned that the rapid pace of growth could not continue indefinitely, and said Singapore should conti-nue to focus on boosting productivity and transforming the economy in order to be able to better withstand future shocks.

Asked if inflation would be a concern, he said he did not see 'broad-based inflationary pressures' just yet.

While prices for energy and vehicle certificates of entitlement may have gone up, those for daily necessities like food, clothing and education services have not seen similar spikes.

But he said the Government was watching the housing sector carefully to see if further measures would be needed to address the effervescent mood in the market.

'We would have to watch it for some time because when there is a momentum like this in the housing market, it doesn't change on a dime,' he said.

'So we will have to watch it over the next few months and decide whether we need to do something more or not. If we need to, we would. We have some instruments.'

While in Washington, Mr Lee met many top United States officials and economic policymakers from the current and previous administrations.

He said he received the impression that US policymakers were quietly confident about the recovery of the American economy, but they remained cautious about potential bumps ahead.

Jobs would continue to be their top priority, due to the high unemployment rate of 9.7 per cent. Full robust growth may also not return for some time.

'And even when they do come back to robust growth, they can't come back to where they were, which is consuming more than they were producing and covering the difference by borrowing,' he said.

'So it would be a different balance and the world would have to get used to the different balance. But as long as it keeps on an even keel like this, I think that provides the conditions for Asia to continue its growth and its transformation.'

On the hot topic of growing US calls for China to revalue its currency, he said current conditions were 'not unfavourable' for Beijing to make such a move.

Mr Lee arrives in Chicago today for a three-day visit.

Source: Straits Times, 15 Apr 2010