ANOTHER quarter of double-digit GDP growth is likely in the bag, following May's scorching 59 per cent pharma-driven industrial output spurt.
Indeed, the second quarter is now expected to exceed Q1's record 15.5 per cent GDP pace after the third straight month of near or above-50 per cent manufacturing growth as well as healthy exports - with double-digit full-year growth now deemed 'almost a certainty' by even those not known to be particularly bullish.
May's 58.6 per cent manufacturing outperformance follows April's revised 49.7 per cent surge and 53 per cent in March, according to figures from the Economic Development Board (EDB).
While the 'drugs effect' was potent last month - pharmaceutical output surged 122 per cent - even with the biomedical segment excluded, industrial production (IP) still grew a robust and sustained 31 per cent in May.
There's no doubt that the highly volatile pharma industry drives the peaks and troughs of the IP figures. After a slump late last year, pharma output rebounded strongly this year, with the latest surge attributed to 'a high value-added product mix'.
But the other industries held their own too last month, particularly electronics with 52 per cent jump in output 'due in part to strong export demand and a low production base during the economic downturn last year', EDB said. Output of semiconductors grew 69 per cent.
Economists - who seem to have been caught off-foot again by the strong May IP figures - lost no time raising their GDP forecasts yesterday, and decisively too.
The Goldman Sachs team, for instance, jacked up its estimates of Singapore's Q2 GDP growth to 14.5 per cent (from 9.1 per cent previously).
The Q2 upgrade is driven by the better-than-expected trade and pharma output data in hand, a Goldman data flash says. 'We expect sequential growth to moderate in the following quarters, yet this change pushes up our 2010 GDP growth forecasts to 12.0 per cent, from 8.8 per cent previously.'
The pace of recovery in Singapore's manufacturing sector has now surpassed that of Korea and Taiwan, and IP levels, excluding biomedical output, are already 7 per cent higher than pre-crisis levels, the Goldman economists note.
DBS Group Research Singapore economist Irvin Seah believes the manufacturing sector is on track for a 50 per cent expansion pace in Q2, and that the official 7-9 per cent 2010 GDP growth forecast will have to be revised up.
But while impressed by the sterling IP data, Mr Seah does not expect the manufacturing pace to be sustained in the second half of the year, citing 'demand weakness due to policy tightening in Asia as well as the austerity drive in Europe'.
The withdrawal of fiscal stimulus and tighter monetary conditions are expected to weigh on consumer demand in Asia, he said. And while a slower eurozone is not expected to derail the recovery process, 'it is still a concern for small export-dependent economies such as Singapore', he added.
As for Citigroup economist Kit Wei Zheng - who early this week raised his forecast of Singapore's 2010 GDP growth to a 12.5 per cent market high - May's 'astounding' IP figures have merely reaffirmed the GDP upgrade, adding now upside risks to the figure.
He believes Q2 GDP growth could come in between 16 per cent and 18 per cent, surpassing the Q1 high.
'Including an upward revision to Q1 GDP, even assuming a technical pullback in IP in June, and a further sequential GDP pullback of around minus 7 per cent seasonally adjusted, annualised Q3 growth and flat in Q4, we could still see full-year 2010 growth of more than 15 per cent,' Mr Kit says. In other words, he has - all but in black and white - raised his 2010 forecast to yet another new high.
The Ministry of Trade and Industry is due to release the flash Q2 GDP estimates, based on only April and May data, within the first half of next month. The official forecast for Singapore's 2010 growth is likely to be upgraded then.
Meanwhile, private sector estimates of 2011 GDP growth see a slowdown to around 5 per cent.
Source: Business Times, 26 Jun 2010