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