Source : AsiaOne News, Fri, Aug 10, 2007
14.4 percent in the second quarter, its fastest pace in two years, but the government warned that the turmoil in international credit markets could hurt growth.
The quarterly figures, released on Friday, reflect a boom in construction and banking -- on Wednesday the government raised its 2007 economic growth target to 7-8 percent from 5-7 percent and some independent economists said even that was conservative.
The government press statement contained discrepancies due to rounding, highlighting an annualised, seasonally adjusted growth rate of 14 percent that the more detailed tables showed to be 14.4 percent.
That compared with the 12.4 percent growth in gross domestic product forecast in a Reuters poll of economists and an official advance estimate of 12.8 percent, which was largely based on data from April and May.
Compared with a year earlier, GDP expanded 8.6 percent in the second quarter, faster than the median 8.0 percent forecast by economists and the highest since the first quarter of 2006.
"The services sector did a lot better than expected. Not only the financial sector was strong, but the wealth effect from higher property prices and a strong stock market contributed to the growth in the services sector," said Song Seng Wun, an economist at CIMB.
"But given the uncertainty in the financial markets, we expect the impact of the fallout from the credit crunch in the U.S. might be felt in the fourth quarter."
The Monetary Authority of Singapore and officials joined other central banks in trying to instil a sense of calm in financial markets and said it was ready to pump funds into the money market should liquidity dry up.
"The situation in the U.S. credit markets remains currently the most significant risk on the horizon," Ravi Menon, second permanent secretary at the Ministry of Trade and Industry, told a news conference on Friday.
"Today, it is largely within the credit markets. The concern is that general risk aversion will then spread to other financial markets and, if that translates into increased volatility, then it could be transmitted into a slowdown in consumption and investment growth globally."
CONFIDENCE
Rohit Chatterji, who runs the investment banking business for U.S. bank JPMorgan in Southeast Asia, said market uncertainty could mean that companies take a more cautious stance on mergers and acquisitions.
"The first half has been very good for Southeast Asia because there was a lot of capital-raising for both debt and equity which drove the financial sector," he said.
That underpinned the strong performance of Singapore's financial services sector, which recorded annualised growth of 39.7 percent in the quarter thanks to strong business at banks, wealth managers and funds in the city-state's financial district.
Manufacturing, up 17.2 percent on an annualised and seasonally adjusted basis, managed a rebound after a drop of 6.2 percent in the first quarter, due to demand for offshore oil rigs and drugs. Electronics production remained lacklustre.
Construction was up 15.0 percent amid a property market boom.
Although Singapore is increasing its focus on services and tourism, its volatile economy is still highly dependent on growth and consumer confidence in the main markets for its manufactured exports in Europe and the United States.
Its neighbour Malaysia, equally dependent on external demand, confirmed its 6 percent growth forecast for this year on Thursday despite an unexpected drop in June exports.
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