Improved Economic Outlook For This Year, Says MTI

Source : Today, Friday, August 10, 2007

THE Ministry of Trade and Industry announced today that the economy is expected to grow by 7.0-8.0 per cent this year, riding on the momentum of the second quarter and supported by a favourable external environment and broad-based growth across the major sectors.

Growth picked up pace in the second quarter, with GDP expanding by 8.6 per cent year-on-year following 6.4 per cent in the previous quarter. Growth on a seasonally-adjusted quarter-on-quarter annualised basis increased to 14 per cent from 8.8 per cent in the first quarter.

Overall, the Singapore economy grew by 7.6 per cent in the first half of the year.

Growth has become more broad-based in the second quarter, with the financial services and construction sectors registering double-digit growth, and the manufacturing sector remaining healthy despite a slowdown in electronics.

Financial services expanded by 17 per cent in the second quarter, up from 14 per cent growth in the first quarter.

The banking cluster was supported by strong growth in both the domestic segment and offshore Asian Dollar Market, with loans to non-bank customers rising by 10 per cent.

The wealth advisory cluster remained buoyant, riding on growing affluence in the region and continued demand domestically for professional fund management services.

The construction sector grew by 18 per cent, the strongest growth in almost 10 years.

Growth in the manufacturing sector picked up pace to 8.3 per cent, with strong growth in biomedical manufacturing and transport engineering more than making up for the slack in electronics.

The ministry says continued strong economic growth has supported job creation. Employment grew strongly by 61,900, higher than 49,400 in the first quarter.

The seasonally adjusted unemployment rate fell to 2.4 per cent in June from 2.9 per cent in March. The number of workers retrenched declined to 1,600, from 2,000 in the previous quarter.

MTI has raised the full-year GDP growth forecast for this year from 5.0-7.0 per cent to 7.0-8.0 per cent, taking into account a healthy external environment, the broad-based growth momentum across major sectors, continued growth in the composite leading index and strong business expectations.

The ministry says that the global economic environment continues to be healthy. Growth in the US has moderated but remains intact in the face of problems in the sub-prime credit markets. The Japanese and EU economies continue to recover on the back of strong domestic demand and firm business sentiment.

The ministry says prospects in Asia remain robust, with the Chinese economy growing at a rapid pace. The chief downside risk to this favourable external outlook is the potential for current problems in US credit markets spreading to other financial markets and possibly dragging down consumption and investment.

From a sectoral perspective, growth in financial and business services, manufacturing, and construction is expected to be higher than earlier envisaged. The driving factors underpinning this higher growth are broad-based: Strong global demand in the biomedical, aerospace and marine industries, robust regional demand for financial services, and a buoyant domestic property market and construction industry with a steady pipeline of contracts awarded.

The latest surveys of business expectations show that both manufacturing and services firms expect better business conditions in the coming half of the year.