ECONOMISTS expect Singapore’s GDP growth to have slowed sharply in the third quarter, advance estimates for which will be released on Thursday next week. The deceleration will be led by the biomedical sector, with pharmaceutical production still in a trough. But signs of slowdown in electronics and other sectors are emerging too.

According to a Reuters poll of 15 economists, economic growth in Q3 is seen at 10.8 per cent year on year. If so, this would be markedly slower than the 16.9 and 19.2 per cent GDP growth that Singapore notched up in Q1 and Q2 respectively.

The Reuters poll also forecasts a median 15.6 per cent annualised contraction quarter on quarter after seasonal adjustments, which would be the largest such plunge on record.

The slowdown will not be restricted to the biomedical sector though. Global manufacturing purchasing managers’ indices (PMI) have fallen sharply in recent months, ‘suggesting external demand is poised to slow’, Credit Suisse economist Wu Kun Lung said in a recent note.

Singapore’s PMI has also been under 50 – indicating a manufacturing contraction – for two months now. ‘The end of restocking gains should cause other manufacturing sectors (apart from biomedicals) to slow going forward,’ said Citi economist Kit Wei Zheng, adding that Citi’s electronics leading indicator already points south.

‘Increasingly sluggish recovery in key export markets and other external uncertainties should drive a moderation in Singapore’s manufacturing activity,’ said Standard Chartered economist Alvin Liew.

The services and construction sectors are expected to see Q3 growth moderate from Q2′s strong performance, though neither is likely to contract.

‘Trade-related services are slowing, while tourism-related industries are benefiting from the opening of the IRs, Youth Olympic Games and F1,’ said Citi’s Mr Kit.

Financial services too, should continue to perform well ‘thanks to growth in private banking and sustained strong business interest in Asia,’ said StanChart’s Mr Liew. While they are now benefiting from the lagged impact of property transactions on mortgage growth, this should slow next year, Mr Kit added.

As for construction, progress payments are falling now that the IRs have been completed. But Mr Kit said the sector will be supported by an estimated 100,000 private and public housing units to be completed from now until 2015, as well as continued spending on land transport infrastructure.

With the expected Q3 sequential contraction off-setting a large portion of the output jump in the first half, economists say the narrowed output gap will likely mean no change in monetary policy at the Monetary Authority of Singapore’s review next week.

But one risk factor that could influence a re-centring of the band in which the Singapore dollar trades could be inflation pressures from the labour market, said Mr Kit.

Source: Business Times, 9 Oct 2010

SINGAPORE should be able to handle a population of slightly more than six million, but a number beyond that would be ‘worrying’, the chairman of the Centre for Liveable Cities advisory board Liu Thai Ker said yesterday.

Speaking at the Centre for Liveable Cities lecture series yesterday, Mr Liu, a former chief executive of the Housing & Development Board and Urban Redevelopment Authority, said that since Singapore has planned for a population of 5.5 million, a 10 to 12 per cent increase from that to a population of 6.2 million ‘would not make a huge difference’.

‘The question is, beyond say 6.3 million, seven million, 7.5 million, what will happen,’ he said. ‘I think that is where we will begin to worry. But personally I feel that we need not despair too quickly in the sense that we still have Pulau Ubin, we still have Pulau Tekong.’ Using these islands, he said, is a last resort, a contingency.

He added that if Singapore’s population goes beyond 7.5 million, it will ‘need to do some rethinking’.

In 2007, National Development Minister Mah Bow Tan said the government had increased its long-term population estimate. For planning purposes, he said, URA would use a projected population of 6.5 million, up from the 2001 projection of 5.5 million.

The 6.5 million number, however, is not a target the government feels Singapore’s population should reach. Instead, Mr Mah said it is a ‘planning parameter’ – to guide future development blueprints in URA’s Concept Plan.

Source: Business Times, 9 Sep 2010

Population projection for planning purposes is an upper limit, not a target

IN 2007, National Development Minister Mah Bow Tan announced that the Government had increased its long-term population estimate. For planning purposes, he said, the Urban Redevelopment Authority (URA) would be using a projected population of 6.5 million, up from the 2001 projection of 5.5 million.

With Singapore’s total fertility rate far below replacement levels, the obvious conclusion was that much of the increase would come from foreigners.

Mr Mah’s words were greeted with sound and fury. Singaporeans were worried that it would make them feel like strangers in a strange land. Would the newcomers be able to integrate into Singapore society?

Singapore was already one of the most densely populated countries in the world. Would it get even more crowded? In 2007, Singapore’s total population had already reached 4.6 million.

In October 2007, the distinguished demographer Saw Swee Hock predicted that for the population to hit 6.5 million by 2050, we would need such a heavy influx of migrants that newcomers arriving after 2015 would make up 40.5 per cent of the total population in 2050.

A report in February last year predicted that if the population were to hit 6.5 million by 2020, ground and underground travel demand in Singapore would rise to about 14.3 million journeys a day, with four peak-hour passengers per square metre on the trains.

Three years after it first surfaced, the 6.5 million figure still sparks controversy. Singapore Democratic Party leader Chee Soon Juan gave it prime mention in his response to the Prime Minister’s National Day Rally speech, saying that ‘Mr Lee intends to increase our population to 6.5 million’, with foreigners outnumbering Singaporeans.

This assertion, however, has to be put in perspective. Mr Mah had stressed that the 6.5 million number is not a target that the Government feels Singapore’s population should reach. Instead, he characterised it as a ‘planning parameter’ – to guide future development blueprints in the URA’s Concept Plan.

In fact, 6.5 million was the ‘upper bound’ for Singapore’s population over the long term, Mr Mah said in June 2007. For URA’s purposes, the ‘long term’ is about 40 to 50 years.

Even Minister Mentor Lee Kuan Yew has expressed reservations about the 6.5 million figure. On two separate occasions, he cited a somewhat more modest population target: five million to 5.5 million.

‘I have not quite been sold on the idea that we should have 6.5 million,’ he said in February 2008.

‘I think there’s an optimum size for the land that we have, to preserve the open spaces and the sense of comfort.’

It is therefore not accurate to say that the Government has a firm policy to increase Singapore’s population to 6.5 million come what may.

Nevertheless, a look back at the 6.5 million figure and its genesis uncovers some hard facts about the Government’s population projections. These have had to be revised upwards several times, to play catch-up with immigration.

In the 1991 Concept Plan produced by the URA, the planning parameter used was a population of four million, projected to be reached after 2010. It seemed like a reasonable estimate then, given that the 1990 Census showed that Singapore’s total population was three million.

As it turned out, the estimate was overtaken by events. Singapore’s total population crossed the four million mark in 2000. More crucially, the original four million estimate had failed to take into account the burgeoning number of non-residents, those who are neither citizens nor permanent residents. This saw an average annual growth of 9.3 per cent from 1990 to 2000.

The URA had included only the resident population in its estimates for the 1991 Concept Plan, Mr Mah told reporters in September 2000. Significantly, the latest 2010 Census shows that the resident population is still below four million, at 3.8 million.

But this leads to the question: Why weren’t non-residents factored in from the start?

Only in the 2001 Concept Plan were they included, when URA used as its planning parameter a total population of 5.5 million over the long term. But even then, the 2001 estimates were moot within years.

By 2007, Singapore’s total population had hit 4.6 million. A mid-term review of the 2001 Concept Plan was commissioned to factor in economic and social changes. That was when the figure of 6.5 million was proposed – and greeted with much consternation.

There was a 15 per cent jump in the non-resident population in 2007 over 2006, and an 8 per cent increase in the number of permanent residents.

Were these happening faster than the URA and other agencies had planned for? Senior Minister Goh Chok Tong admitted on Monday that the surge in the number of immigrants had caught the Government by surprise. The National Development Ministry had not provided for the sudden surge in its housing plans, he said.

The non-resident population grew by 19 per cent in 2008. According to the 2010 Census, Singapore’s total population has already crossed the five million mark, with 1.3 million non-residents.

In April 2008, Mr Mah reassured Singaporeans that ‘if we do need to increase our population to 6.5 million in the future… it is comforting to note that our physical resources, especially land, are able to support this’.

The population figures that planners base their blueprints on have far-reaching implications for transport, housing and land use.

And as the Government would have learnt by now, they are also a political hot potato. Handling instructions: Revise with care.

Source: Straits Times, 8 Sep 2010

(SINGAPORE) Sustained, slower rates of foreigner inflows could have implications for the labour force and housing market, a Citi report yesterday said.

A slowing of immigrant inflows, particularly skilled professionals and permanent residents (PRs), raises questions over whether future housing demand can absorb the significant increase in housing supply over the next three to five years, Citi economist Kit Wei Zheng wrote.

Last week, the Advance Release of Census 2010 showed population growth of 1.8 per cent, down from a 4 per cent average growth rate over the previous four years. This was largely due to a sharp slowdown to 1.5 per cent growth in the PR population, from an average rate of 8.4 per cent for 2006 to 2009, Mr Kit said.

Assuming population growth stays at 1.5 to 2 per cent, or 80,000 to 100,000 people a year, for the next five years, Mr Kit estimates that this translates into demand for 20,000 to 25,000 homes a year.

Estimates from the Urban Redevelopment Authority and those based on Housing Development Board announcements show that some 100,000 new public and private housing units are due over the period, so supply should match overall housing demand, Mr Kit said.

But, supply will not be evenly distributed and is likely to be backloaded in 2013/2014, which suggests supply will likely be tight in the next two years, but outstrip estimated demand in 2013 and 2014, at current population growth rates, he added.

‘These back of the envelope estimates suggest that changes in immigration policy have the potential to exacerbate boom-bust cycles in the housing market,’ said Mr Kit.

Risks of this are higher if demand is weaker than expected from 2013 onwards, or if political pressure leads to a further tightened inflow of foreign skilled professionals. Higher risk could also come from further hikes in public and private housing supply in response to overly optimistic demand projections, speculative demand, or pre-election political pressure, he said.

UniSIM labour economist Randolph Tan agrees that the planned increase in housing supply could coincide with weakened housing demand if the immigration slowdown is sustained, adding that PRs have been ‘a significant factor behind the strong demand in housing markets in recent years.’

But DBS economist Irvin Seah thinks the overall impact of population growth changes on the property market ‘will be quite benign’, given the ‘slow but steady’ growth rate and the fact that government and developers can regulate the housing supply coming onstream.

Housing market aside, Mr Kit said that lower potential economic growth rates are expected, as any pick-up in productivity growth is unlikely to compensate for the implied slowdown in labour force expansion. The Economic Strategies Committee target of boosting productivity growth to 2-3 per cent while slowing labour force growth to one-2 per cent is ‘ambitious’, in his view.

Lower immigration rates – especially of PRs – is also likely to ‘accelerate the ageing of the population, with implications for labour force growth and consumption patterns,’ Mr Kit said.

Mr Tan too, thinks slowed PRs growth has a more immediate impact on labour supply than a fall in indigenous birth rates. ‘PRs tend to be adults already in their prime and are often highly mobile individuals. We will almost certainly see a slowdown in employment growth as a result of this,’ he said.

Source: Business Times, 7 Sep 2010

Most likely outcome now is for 15-15.9% full-year growth, ahead of government’s 13-15%
(SINGAPORE) The Singapore economy could expand by a record pace this year that exceeds the government’s 13-15 per cent forecast, a survey of private sector economists shows.

But the higher base from which next year’s growth will be measured, as well as external uncertainties, have led them to lower projections for 2011.

A Monetary Authority of Singapore survey of 20 professional forecasters last month found that forecasts now point to a most likely outcome of 15-15.9 per cent growth.

This significant jump, from a probable outcome of under 11 per cent growth in June’s edition of the survey, was thanks to the 18.8 per cent surge in Q2 GDP that outstripped expectations for 9.4 per cent growth.

The latest median forecast of 14.9 per cent growth for the year, gleaned from a range of 11-16.5 per cent, was also a sharp hike from June’s 9.4 per cent.

Manufacturing is still expected to be the economy’s key driver this year with a median growth forecast of 28.7 per cent, up from 16.7 per cent three months ago.

And analysts are also expecting non-oil domestic exports to grow 19.5 per cent, above the official forecast of between 17 and 19 per cent.

Compared to the last survey’s findings, financial services, wholesale & retail trade, hotels & restaurants, and private consumption are now forecast to grow more strongly this year. Only for construction did the analysts’ median growth forecast fall slightly.

The economists polled now expect consumer price inflation of 2.9 per cent this year, up from 2.8 per cent three months back. Unemployment forecasts for the year also showed an uptick from 2 per cent in the last survey, to 2.2 per cent.

In the immediate months ahead, economists are expecting 11.6 per cent growth in Q3, up from 6 per cent in the last survey. The focus is on manufacturing, whose 44.5 per cent surge fuelled Q2 GDP growth but is now expected to slow to 15.9 per cent growth in Q3.

Already, Singapore’s industrial production grew at its slowest pace in eight months in July. The regional production picture is not too optimistic either, with declines in the recent purchasing manager indexes (PMI) coming out of Taiwan and South Korea.

Also of growing concern are sharper and earlier than expected signs of a slowdown in the US, where sluggish economic growth and high unemployment continue to weigh on consumer spending.

Standard Chartered economist Alvin Liew said that his forecasts, the most bearish of the lot, reflect lingering concern over external risks which Singapore’s trade-dependent economy would be especially sensitive to.

He expects Q3 GDP year-on-year growth of 5.8 per cent (an annualised q-o-q contraction of 29.9 per cent), some way below the median forecast of 11.6 per cent.

But so far, the slowdown in manufacturing has been within expectations, said OCBC economist Selena Ling. And others such as RBS economist Lim Su Sian think that Q3 could even surprise on the upside if the expected pharma pullback is not as sharp and the services sector contributes stronger growth.

Noting that yesterday’s rebound in China’s PMI ‘offers reassurance that China’s growth, critical for Asia and the world, continues’, Action Economics director David Cohen also expressed optimism that Singapore would continue on a positive trajectory and might do better than the 15.5 per cent he projects for 2010.

But looking a little further into the future, next year’s first half being measured off this year’s high base and residual risks of a global double-dip have led forecasters to nudge their 2011 forecasts downwards.

The survey showed that economists now expect 2011 growth to be between 4 and 4.9 per cent, down from 5 and 5.9 per cent last year.

Citi economist Kit Wei Zheng stressed, however, that external dampeners must be set against domestic factors supporting the growth story.

‘Sizeable investments locked-in and approved before the recession are set to come onstream in the next one or two years, financial sector activities are being relocated to Singapore and the IRs are not running at full capacity yet,’ he said.

Provided that there is no ‘full-blown global recession’, these new engines ought to sustain growth in the coming year, he added

Source: Business Times, 4 Sep 2010

MAS survey says up to 15.9% economic expansion likely, mainly due to manufacturing

SINGAPORE’S rebounding economy may burst through the 15 per cent growth ceiling projected by the Government earlier this year.

According to 20 economists and analysts surveyed by the Monetary Authority of Singapore (MAS), the economy is most likely set to expand by between

14.9 per cent and 15.9 per cent this year, rather than the 13 per cent to 15 per cent range expected by the Government.

Their median growth forecast of 14.9 per cent – announced in the latest MAS survey of professional forecasters released yesterday – is a significant leap from the median forecast of 9 per cent contained in the previous survey in June.

And, if achieved, it will enter the record books as Singapore’s highest-ever annual growth rate.

The last record was set in 1970, when the economy advanced 13.8 per cent.

Alongside headline growth, the economists have also hiked their forecasts for this year’s exports, inflation and the unemployment rate.

But this year’s bigger output jump could spell slower growth next year, because 2011′s performance will be measured against this year’s higher base. The forecasters are now anticipating 4 per cent to 4.9 per cent expansion for next year, down from their earlier forecast of 5 per cent to 5.9 per cent.

The upgraded projection for this year was driven mainly by the manufacturing sector, which is now thought to have performed better for the full year.

Expectations have also been raised for the financial services and wholesale and retail trade industries.

This should see the economy logging double-digit expansions in the third and fourth quarters, said the economists polled.

They are predicting 11.6 per cent growth for the third quarter, up from a previous forecast of 6 per cent, although it is down on the 18.8 per cent increase in the second quarter.

In the fourth quarter, growth may accelerate to 12.6 per cent, the survey showed.

Most economists believe the economy peaked in the second quarter and will slow as the global economic recovery wavers in the second half of the year.

Mr David Cohen of Action Economics forecasts 15.5 per cent growth this year, even after taking into account a quarter-on-quarter contraction in the third quarter and slight growth in the fourth quarter.

‘I think the sense is that the second quarter got a little ahead of itself, and may have been exaggerated by some special factors in biomedical manufacturing,’ he said.

‘The production schedules tend to bounce around and maybe were a little overstated in the second quarter.’

On top of that, Mr Cohen said ‘there is a sense that the global economy is slipping from the pace of rebound that has been seen this year’.

While the Asian economies generally continued roaring in the second quarter, growth in both Japan and the United States slowed sharply.

‘People are nervous, certainly, that the US can slip into a double-dip. But I think the most likely scenario is for continued positive growth in the US and, as long as they can avoid a double-dip, here in Asia, the continued momentum should support a positive trajectory,’ said Mr Cohen.

A technical recession in the second half is even possible, said JP Morgan economist Matt Hildebrandt, who forecasts 14.8 per cent growth this year.

Morgan Stanley economists, who expect 16 per cent growth this year, have warned that leading indicators such as the US ISM new orders index imply a slowdown in export growth in the coming months.

But ‘the strong first half means that a lot of growth is already in the bag, and that a double-digit (growth) headline for 2010 is likely even in a double-dip scenario’, they said in a recent report.

The MAS survey reported yesterday that the Singapore dollar is projected to rise to $1.363 against the US dollar at the end of this month and to $1.35 by year-end.

Source: Straits Times, 2 Sep 2010

CPI rises 3.1% year on year but analysts say food prices should not have a lasting impact

INFLATION in Singapore rose last month as higher costs of cars, homes and food pushed up consumer prices.

The consumer price index here for last month climbed 3.1 per cent year on year, in line with the expectations of economists, who had anticipated that inflation would begin to increase in the second half of this year.

Transport costs were the biggest contributor to the rise – last month, they spiked by 10.7 per cent year on year, due to more expensive cars and petrol, said the Department of Statistics (DOS) in a release yesterday.

The cost of housing also went up 2.7 per cent, boosted by an increase in electricity tariffs and accommodation costs. Food prices rose 1.5 per cent from a year earlier, on the back of dearer prepared meals, vegetables, fresh seafood, meat, poultry, rice and other cereals.

Economists have flagged food inflation as a source of concern, with the prices of basic crops such as wheat, coffee, sugar and corn shooting through the roof recently due to bad weather and droughts. Wheat prices, in particular, have soared 50 per cent since June.

However, economists agree for now that the jump in food prices should not have a lasting impact on inflation, as it is the result of temporary disruptions in supply caused by weather conditions.

A report released yesterday by Credit Suisse carried further reassurance. It said that while food items account for a large proportion of inflation in countries such as Singapore, the run-up in wheat prices is not yet large enough to become a significant driver of inflation.

On a month-on-month basis, Singapore’s consumer price index rose 1.3 per cent last month compared with June, primarily owing to more expensive housing and transport. Housing costs rose not just because of higher accommodation costs and electricity tariffs, but also because rebates for service and conservancy charges were given out in June but not in the last month.

The prices of clothing and footwear were also 3.2 per cent higher last month following the Great Singapore Sale period in June, said DOS.

In the first seven months of this year, consumer prices in Singapore have risen some 2.1 per cent compared with the same period a year earlier. Taking out accommodation costs, the increase would have been 2.9 per cent.

Many economists, including Barclays’ Mr Leong Wai Ho, now believe that the Monetary Authority of Singapore (MAS) will stay put with its current policy of a gradual appreciation of the Singapore dollar when the next policy decision is made in October. Inflation for the year is not expected to exceed the Government’s estimate of between 2.5 per cent and 3.5 per cent.

‘While we expect inflation to continue its upward trajectory, hitting 4 per cent by year end, this would likely remain well within the MAS’ range of expectations, with full year inflation likely to average slightly lower than 3 per cent,’ said Citigroup economist Kit Wei Zheng.

——————————————————————-
Change in prices: July 2010 over July 2009

Transport: 10.7%

Education & stationery: 2.9%

Housing: 2.7%

Health care: 2.3%

Recreation and others: 1.7%

Food: 1.5%

Clothing and footwear: -0.3%

Communication: -2.8%

Overall: 3.1%

Source: Straits Times, 24 Aug 2010

Retail sales lag may be due to consumers’ reluctance to splash out after the recession, flat wages growth

THE economic recovery is roaring along at record pace but cash registers across the island have not been ringing as wildly as expected and economists are struggling to figure out why.

It may be reluctance on the part of still-nervy consumers to splash out after the recession, flat wages growth, or just that the realities on the ground have yet to catch up with the growth statistics.

The headline number has been the seasonally adjusted retail sales index, which has shown month-on-month contraction since February. The June retail figures were 0.7 per cent lower than May, according to the Department of Statistics.

Excluding motor vehicles – their sales are down after the Government released fewer certificates of entitlement – the index was mostly flat with an average 0.6 per cent month-on-month growth in the first half of the year.

The mediocre figures seem out of kilter with the Government’s forecast of full-year economic growth of between 13 and 15 per cent.

Looking at year-on-year figures – again excluding motor vehicles – and the retail sales index has recorded positive growth throughout the first six months, partly due to the low base last year when the economic crisis hit.

Experts say that retail sales might have failed to keep up with the strong economic expansion figures because wage growth is lagging, with pay packets yet to catch the rebound fever.

DBS economist Irvin Seah said it might take some time for strong growth to filter down to consumers. He added that it was well-recognised that the labour market – and hence wage levels – often lagged up to two quarters behind gross domestic product growth.

But the labour market had picked up more quickly this time around compared with the last downturn, thanks in part to various government schemes to save jobs.

‘However, while we have seen wages rise in more specific segments such as finance, the growth in wages has not been broad-based as yet,’ he said.

OCBC economist Selena Ling said retail sales usually moved in tandem with the positive sentiment that economic growth created, and any lag would be slight. She described the retail situation as ‘strange’ and said it could be due to more global shoppers. With budget airlines making travelling abroad affordable, buying patterns may have shifted abroad.

Citigroup economist Kit Wei Zheng said economic growth might have been exaggerated by the biomedical sector. This grew at a blistering 70 per cent in the first half compared with the same period last year due to the production of higher-value-added drugs.

And this growth does not generally translate into more jobs. ‘The sector is more capital rather than labour intensive… this may not translate to the same extent to swings in actual economic welfare on the ground.’

With strong home sales, a substitution effect might have also occurred where spending on a big-ticket item offset spending in other areas, Mr Kit added.

Other data painted a different picture. CIMB economist Song Seng Wun cited MasterCard’s report of a 28 per cent increase in spending during the Great Singapore Sale compared with last year. He said the retail sales index could be tracking spending in a different way since it was unclear how the data was collected.

Based on the retail sales index, it has been a mixed bag for the retail sector this year. Sales of telecommunications apparatus and computers, apparel and footwear and food and beverages were among the worst performers, while watches and jewellery performed better, likely due to strong tourism numbers.

Watch retailer The Hour Glass said in its first quarter financial statement that while sentiment has improved over the last year, consumers remain cautious due to the uncertainty of the global recovery.

Isetan (Singapore) also said in its second quarter results that the strong economic recovery had not resulted in a similar trend in consumer spending at its stores. ‘Following this recovery, it will take time for consumer confidence and spending to return. Until then, competition for the consumer dollar will remain keen and retailers will have to monitor their costs closely,’ it said.

Singapore Retailers Association president Jannie Tay said that sales this month are gradually picking up and are expected to hold steady. Consumers remain concerned over the economic recovery in the United States and are not over-excited about spending, she said, adding: ‘We expect to at least maintain last year’s sales, but costs have gone up so our bottom line might become slimmer.’

Source: Straits Times, 21 Aug 2010

AFTER an exceptional first half, the soaring Singapore economy is returning to more sustainable levels, official figures showed.

Some of the heat came out of the red-hot economy at the tail-end of the second quarter, with indications now that growth for the rest of the year will be around 12 per cent.

That is a number many countries would envy but it represents a slowdown from the record 17.9 per cent expansion in the first six months of the year.

‘It does confirm our long-held view that the Singapore economy is due for a slower second half this year. Still, we see this moderation in growth as a healthy normalisation of economic activities,’ said DBS economist Irvin Seah.

A cut in factory output in June, especially in drugs output, was behind the slower-than-expected growth of 18.8 per cent in the April to June period from a year ago, according to Ministry of Trade and Industry (MTI) figures yesterday.

This was a few notches below the 19.3 per cent forecast by both the Government and private-sector economists, but still higher than the 16.9 per cent notched up in the first quarter.

Nonetheless, the Government is sticking to its forecast that full-year growth will come in at between 13 and 15 per cent. This means expansion will likely not surpass 12 per cent for the rest of the year, said MTI permanent secretary Ravi Menon at a media briefing yesterday.

In fact, as growth cools off from quarter to quarter for the rest of the year, there is a statistical possibility of a technical recession, he said.

A technical recession, defined as two consecutive quarters of negative quarter-on-quarter growth, could happen, he explained, if the volatile output in the drugs sector falls while the rest of the economy stays flat in the second half.

Biomedical output will slow from its blistering 70 per cent first-half pace, with plants shutting for scheduled maintenance and those in production changing to lower value ingredients, he said.

Quarter-on-quarter growth in the April to June period has already slowed to 24 per cent from 45.7 per cent in the first three months of the year.

Mr Menon added: ‘I should emphasise that it is technical… a statistical outcome of what happened in the first half. The underlying trend in the economy is for flat growth and the recovery maturing at a more sustainable rate.’

Citigroup economist Kit Wei Zheng said the economy could contract by between 9 and 10 per cent this quarter on a quarter-on-quarter basis and have zero growth in the three months after that.

Still, the manufacturing sector grew a spectacular 44.5 per cent in the second quarter, leading a broad-based recovery boosted by drugs manufacturing, electronics and tourism, Mr Menon said.

Non-oil exports grew 28 per cent in the second quarter as shipments to all of the top 10 markets grew, with the biggest increases to China, Europe and Hong Kong, said International Enterprise (IE) Singapore.

The integrated resorts lifted tourism, as well as the services sector, which grew 11.2 per cent in the second quarter, following 11.4 per cent growth in the first.

‘Singapore has never experienced such a synchronous rebound in all key sectors of the economy, compared to previous recoveries,’ Mr Menon said.

The 17.9 per cent growth in the first half is a record, and what Mr Menon called ‘the strongest economic recovery Singapore has ever seen’.

Yet it was not the fastest as it took eight quarters for output to recover to pre-recession levels compared with six or seven in past recoveries.

Looking ahead, Mr Menon reckoned a double-dip recession is unlikely in the US, though unemployment remains high.Risks to growth in Europe from the debt crisis appeared to have eased. But growth in China is easing from fewer infrastructure investments, affecting traders of minerals and raw materials here.

Source: Straits Times, 11 Aug 2010

(SINGAPORE) The Republic’s exports growth accelerated in the second quarter, thanks to stronger global trade flows, but a more subdued phase is on the cards.

Non-oil domestic exports (NODX) rose 28 per cent in Q2 from a year ago, up from the 23 per cent growth posted in Q1, trade agency International Enterprise (IE) Singapore said yesterday.

And total trade rose 28 per cent year-on-year in Q2, faster than the 27 per cent growth seen in the first quarter, said IE Singapore’s quarterly trade review, released in conjunction with the Ministry of Trade and Industry’s (MTI) quarterly GDP report.

While total trade was due to strong growth in world trade and higher oil prices than a year ago, the closely watched NODX also grew.

A sustained upswing in the global electronics cycle lifted exports of electronic NODX such as integrated circuits, IC parts and PC parts, while growth in non-electronic NODX was led by domestic exports of petrochemicals, specialised machinery and ships.

The only category of NODX which fell in Q2 was pharmaceuticals, whose 11.4 per cent decline was greater than the 5 per cent dip registered in Q1.

On a seasonally-adjusted basis, NODX rose 9 per cent in Q2 from the quarter before, following Q1′s 8.3 per cent growth from Q4 last year.

Things look more subdued for the rest of this year. ‘The weakening of the euro against the currencies of key trading partners and sluggish domestic demand in the US and the EU27 is expected to dampen world trade in the second half,’ said IE Singapore. Its forecasts for both NODX and trade growth this year still stand at 17- 19 per cent, after upward revisions of both last month.

Recovery in the external economy also boosted Singapore’s GDP in Q2 via tourism dollars. Visitor arrivals hit record highs in recent months, driven by greater consumer optimism abroad and drawn by the newly- opened integrated resorts. This boosted tourism’s contribution of an estimated 5-8 per cent to GDP, cutting across various sectors.

MTI Permanent Secretary Ravi Menon said at a briefing yesterday that the gaming industry is not listed separately for now as its contribution remains small and confidentiality issues are at stake, with only two players in it.But the IRs have begun contributing to GDP with output captured under ‘other services industries’, he said. This saw growth pick up from 7.5 per cent in Q1 this year and 5.4 per cent in Q4 last year to 12.9 per cent in Q2.

Source: Business Times, 11 Aug 2010