THE 'V' is back in fashion, as a wave of optimism sweeps across those who monitor Singapore's economy.
The brokerages issued reports on Friday pushing up gross domestic product (GDP) forecasts for this year, with Morgan Stanley forecasting minus 3.5 per cent and UOB minus 3.3 per cent - both a good deal better than earlier tips of a 5per cent contraction.
And a week before that, Credit Suisse economists revised their forecast upwards for just a 2.4 per cent dip.
The bullishness comes as manufacturing and export data - critical components of the Singapore economy - seem to have not only turned the corner, but are firmly on the way up as the country latches on to the global upturn.
The upgrades come on the back of a survey of 21 private sector economists released at the beginning of the month that showed sentiment is quickly turning up among most forecasters.
The Monetary Authority of Singapore (MAS) survey showed an improved consensus for a 3.6 per cent dip from 6.5 per cent when the survey was conducted six months before.
But the Government, so far, is sticking to its official forecast of a 4 per cent to 6 per cent dip. Last week, Finance Minister Tharman Shanmugaratnam warned of a potential double dip - the much feared W-shaped outcome - meaning GDP could still contract further in the months ahead.
Nonetheless, strong global data is forcing the hand of many economists.
Citi's Mr Kit Wei Zheng has turned from one of the more bearish forecasters to one of the most bullish. He has lifted his full-year estimate from minus 5 per cent to minus 2.7 per cent, and expects a whopping 6.2 per cent expansion next year.
He is convinced of a powerful V-shaped recovery for Singapore, driven by a sustained surge in drugs output and a pickup in the electronics sector, which he believes has bottomed out.
HSBC's Mr Robert Prior-Wandesforde is also tipping a strong export-led recovery, but he is yet to revise his forecast.
He said many indicators point to a strong rally in Asian domestic demand based on government stimulus packages as well as consumer spending and investment. It could all add up to a timely boost for Singapore's exports to the region.
'This is happening before the full impact of the highly synchronised fiscal and monetary stimulus measures have been felt in the region,' he wrote in a report.
DBS economist Irvin Seah, who has also upgraded his forecast, said that while the reasons for the recovery so far have been due to the manufacturing sector, the positive impact of global recovery will filter down to the services sector and lead a more broad-based rebound.
However, some economists are not jumping on the recovery bandwagon just yet, with those like Standard Chartered's Mr Alvin Liew waiting for more data.
Mr Liew does not think that manufacturing's performance in the next two quarters will have as much of a spring in its step as in the second quarter, when output grew 12.4 per cent and helped lift the economy out of a technical recession.
'We need to see if the manufacturing recovery is more than just a pharma story and a restocking story,' he said. He is not yet convinced of a tech sector rebound.
Others, like OCBC's Ms Selena Ling, are still sceptical.
She believes all the positive data and sentiment have already been factored into the numbers, and though full-year GDP may come in better than her minus 4.6 per cent forecast, it is likely to remain close to minus 4 per cent.
'If there's any surprise, it will not come from the export side, but would be in the form of services picking up faster than expected,' she said.
The numbers for next year are even more varied among economists, who see dangers ahead.
Ms Ling cautioned: 'Going forward, it will be a tricky balance for policymakers to need to nip the (inflationary) bubbles, but not step on the brakes so much that it kills the recovery story.'
Source: Straits Times, 15 Sep 2009
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