(SINGAPORE) Singapore's economy may grow by up to 10.6 per cent in the second quarter, leading indicators from the latest BT-UniSIM Business Climate survey show.
After six months of contraction, all indicators of actual business activity shot into expansion mode in Q1, with orders and new business staging a particularly sharp recovery. Optimism over business prospects for the next six months also spread to more of the 155 firms polled in early April.
These indicators (which over the survey's 15 years have been found to correlate closely to GDP growth in the following quarter) now predict growth of between 8.9 per cent and 10.6 per cent in Q2.
Survey director Chow Kit Boey had initially expected an upward revision of actual Q1 GDP growth to lift the second quarter growth above that range. But the Greek debt crisis and stockmarket weakness has dampened sentiment, so Q2 growth is now expected to fall within the predicted range.
Economists say that the impact of Europe's sovereign debt woes have been restricted to the financial markets and have yet to hit Singapore's real economy.
Barclays Capital economist Leong Wai Ho thinks that 'the impact from growing fiscal austerity in Europe will only come in late 2010 or 2011'. Singapore's relatively limited export exposure to Portugal, Ireland, Greece and Spain also means that if problems are confined to these, any impact would be manageable, Citi economist Kit Wei Zheng said.
Other factors which suggest that 10 per cent growth in Q2 is within reach include last year's low base and recently added capacity to the economy, Barclay's Mr Leong said.
The opening of both integrated resorts, hotels, new malls, the Shell petrochemical plant and vaccine plants can be expected to deliver one-time boosts to growth in the next three quarters, he said.
In any case, the across-the-board turnaround in company sales, profits and orders/new business reported in the latest survey, echoed the stellar advance estimates of 13.1 per cent Q1 GDP growth.
An upward revision is expected when actual GDP figures are announced later this week.
'The improvement in orders and new business in Q1 was spectacular,' said Ms Chow. The orders/new business net balance (the difference between the proportion of firms reporting a gain and those reporting a fall) of 42 per cent was 52 percentage points up from just a quarter ago.
More firms registered increased profits and sales. The net balance indicator for sales rose 37 percentage points, while that for profits gained 33 points from Q4 09.
It was also no surprise then, that close to two thirds (64 per cent) of the companies polled foresee 'better' or 'much better' business prospects in the next six months.
Variations persisted by size and company ownership though. Large firms outperformed small firms (with sales of less than S$10 million if in manufacturing, or S$5 million otherwise) on all the survey's key indicators. Foreign-owned companies outdid local ones on all indicators, thanks to the larger gains that foreign firms made on the back of better global sentiment and higher sales abroad in Q1.
The financial and business services sector retained its 'star performer' status for a third straight quarter, posting the best performance in profits and orders/new business.
Firms in commerce performed best in sales and were most optimistic about the next six months. But for smaller firms, the sector with the best business prospects in the next half-year is construction.
Source: Business Times, 17 May 2010
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