Economists forecast 9% growth for S'pore this year

Forecast from MAS's latest survey hits the upper limit of govt's 7-9% range for 2010

(SINGAPORE) Economists now expect Singapore to grow a stronger 9 per cent this year, predicting larger jumps in manufacturing, exports and wholesale & retail trade than they had forecast earlier.

This median GDP (gross domestic product) growth forecast from the latest Monetary Authority of Singapore (MAS) survey of 19 professional forecasters hits the upper limit of the government's 2010 forecast range of 7 to 9 per cent growth. It also rose from the 6.5 per cent median forecast three months ago. That, too, had been at the top of the previous official forecast range.

MAS polled the economists late last month, after a flurry of forecast upgrades followed Singapore's sterling Q1 GDP report of 15.1 per cent growth, far surpassing the March survey's median growth forecast of 9.5 per cent.

In recent weeks, risks emanating from the European sovereign debt crisis have caused much uncertainty and market turmoil worldwide. But David Cohen of Action Economics pointed out that recent data releases in this region - Singapore's manufacturing numbers, Taiwan's exports value and South Korea's job growth - have all shown positive turns.

While all economists BT spoke to said that their forecasts have accounted for developments in Europe, how these were factored in clearly differed, given the wider range of forecasts this quarter. Forecasts ranged from 6.5 per cent to 12 per cent, compared to a narrower range of 5 to 8 per cent in the last survey.

With the most bearish forecast of 6.5 per cent, Standard Chartered economist Alvin Liew said: 'We want to reflect a more cautious outlook, given the situation in Europe and the possibility of tightening measures in China.'

If the European situation hits demand and trade flows, it 'will definitely show up in Singapore's numbers', he said.

The question, though, may be when.

Barclays Capital economist Wai Ho Leong expects the dampening effect of slowed European growth and export demand to flow in gradually. 'The impact will not be immediate but come in ripple after ripple over the next few years as European governments tighten their budgets,' said Mr Leong, who tips growth to be 8.5 per cent this year.

'Even with weakness in demand from Europe factored in, we still expect a strong full-year number,' said DBS economist Irvin Seah, who upped his forecast to 10.3 per cent since the MAS poll, on the back of April's strong industrial production which he thinks could deliver double-digit growth in Q2.

While a quarter-on-quarter contraction is possible as momentum slows from Q1's outstanding growth, the economists still expect Q2 GDP to grow 9.4 per cent year on year, up from the 6.3 per cent median forecast in March's survey.

Hinting at rising inflationary pressures, expectations for consumer price inflation also crept up to 2.8 per cent from the last survey's median forecast of 2.7 per cent.

Source: Business Times, 10 Jun 2010