# Rebound stronger than that in previous downturns
# Economy now 2.8 per cent above its previous peak
ECONOMISTS looking for reasons to upgrade their Singapore growth forecasts into double-digit territory were presented with plenty yesterday.
A review by the Monetary Authority of Singapore (MAS) found that the economy's recovery from the global recession has been stronger than rebounds from previous downturns.
In fact, the economy has rallied so sharply that it is now about 2.8 per cent above its previous peak in the first quarter of 2008, the MAS said in its twice-yearly macroeconomic review yesterday.
And with the recovery broadening and global demand returning, the economy is likely to continue on a 'firm recovery path' for the rest of the year.
This is likely to raise hopes of higher economic growth than the Government's official forecast of 7 per cent to
9 per cent this year. Economists have suggested that even double-digit growth is not out of the question, as long as the economy stays on the recovery path in the coming months.
The MAS review seemed optimistic on this point. Although the pace of growth may moderate from the sizzling 32 per cent quarter-on-quarter rise in the first quarter of this year, 'the underlying drivers of growth are likely to remain intact, and the level of economic activity sustained at a high level', said the MAS.
While the Ministry of Trade and Industry said in February that the outlook for the second half of the year remains uncertain, the MAS yesterday said it is now less likely that there will be a significant pullback in output for the rest of the year.
Growth will be led mainly by improvements in IT manufacturing, trade-related services and tourism-linked activities, it added.
In tandem with the recovery, more jobs are likely to be created this year. But not all industries will hire at the same pace, the MAS said.
Prospects look brighter for job seekers in financial services, as banks expand in anticipation of high demand for corporate banking and wealth management services in the region.
A strong recovery in trade also bodes well for hiring in the wholesale trade and transport and storage industries, as well as in supporting industries such as business services, the MAS said.
On the other hand, workers in the retail, hotel and restaurant industries may be less in demand after the hiring blitz by the integrated resorts last year. Since these industries tend to recruit more foreign workers, employers may also be more directly affected by the impending hike in foreign worker levies and cut down on hiring.
Similarly, manufacturers and construction firms are unlikely to embark on enthusiastic recruitment drives this year in the light of the levy hike, said the MAS.
But in general, the labour market has already tightened significantly with the economic recovery and wages in some industries may soon go up.
While this sounds good for workers, higher wage costs will add to inflation, which is already expected to come in higher than normal this year. Consumer prices may grow by as much as 4 per cent in the fourth quarter - the highest level in almost two years - and are forecast to rise 2.5 per cent to 3.5 per cent for the whole year, the MAS said.
The main culprits are the prices of cars and the costs of commodities such as oil. Each could account for about two-fifths of inflation this year, the review said.
'Price increases are likely to be especially steep in the coming quarters, due largely to higher car prices, before moderating towards the end of the year.'
Anticipating these inflationary pressures, the MAS earlier this month tightened policy by letting the Singapore dollar appreciate in a 'modest and gradual' fashion.
Yesterday, it said the tighter stance was 'appropriate and timely, considering that the Singapore economy has recovered strongly from the global financial crisis, and is likely to continue on a firm recovery path'.
Source: Straits Times, 29 Apr 2010