It will help offset pockets of weakness in chemicals, construction sectors: MAS
THE rebound in trade is igniting a boom in sectors like manufacturing and wholesale trade which are in turn driving up the economy, the Monetary Authority of Singapore (MAS) said.
The remarkable turnaround in the global tech industry, in particular, will contribute heavily to economic growth, according to the regulator's macroeconomic review yesterday.
This will help offset the 'pockets of weakness' that remain in sectors such as chemicals and construction.
The global IT recovery has swept the Singapore economy to a faster-than- expected pace of growth.
Double-digit rises in electronics output, including a 73.8 per cent gain last month from a year ago, has led the manufacturing sector to grow 32.9 per cent in the first quarter.
The tech sector rally is now entering a period of sustainable growth where there is 'strong demand and well-balanced supply', the report said.
The first stage saw a recovery in supply as companies restocked their inventories early last year, while the second stage saw pent-up consumer demand catching up with supply at the turn of the year.
Consumers will be increasing their demand for laptops and smartphones, particularly in China and the United States, while many companies will be replacing computer systems later in the year.
This all means chip demand in particular will be boosted by their increased use in PCs and handsets. Industry associations tip a 20 per cent rise in global chip sales this year.
Chip production comprises more than half the electronics output here.
Manufacturing will be further bolstered by the opening of Applied Materials' semiconductor facility and Renewable Energy Corp's solar manufacturing complex this year.
These openings will help offset the eventual closure of the Seagate hard disk drive plant, the MAS said.
Other plants coming onstream include four new biologics facilities and the Shell and ExxonMobil cracker plants that will boost the pharmaceutical and petrochemicals industries.
Tourism will be spurred by regional visitors to the two new integrated resorts with an increase of more than $5 billion in receipts expected this year.
Shipping will see more container activity driven by intra-Asian trade, though an excess supply of ships may continue to dampen a recovery.
The financial sector has not recovered quite as rapidly but should continue on a recovery path this year.
Non-bank lending is expected to rise alongside the general economic recovery and drive financial sector growth.
Lending in manufacturing, trade and financial market activity should also rise in tandem with increased growth in these sectors, but inter-bank lending could grow slower as it is more linked to the performance of the G-3 economies of the US, the European Union and Japan.
It is not all smooth sailing though. The chemicals sector is facing a global downturn with demand for ethylene forecast to remain below its historical average growth rate over the next five years after a build-up of excess supply.
The construction industry will also take a breather in the next few quarters after the recent building boom. New contracts for large private industrial and commercial projects have continued to be weak.
Source: Straits Times, 29 Apr 2010