The Singapore economy probably rebounded in the first quarter, escaping a technical recession.
A Today strawpoll of seven private sector economists shows all those surveyed expect the Government to announce positive GDP growth, when it unveils flash GDP estimates for the first quarter tomorrow.
“But the question is: is there a sustainable demand in the pipeline?” said Mr Vishnu Varathan, an economist at research house Forecast. “There is no compelling reason to suggest that we are on a roll and it is going to get better as we go.” Their median forecast for quarter-on-quarter growth came in at 11.7 per cent. This, thanks to a sharp swing in biomedical and electronics exports.
However, forecasts vary considerably - from a low of 5 per cent from OCBC Bank to a bullish 19 per cent by Citigroup.
If the first quarter figure had been negative, Singapore would technically be in recession having suffered two successive periods of quarter-on-quarter contractions.
On a year-on-year basis, economists surveyed had a median forecast of 6.3 per cent growth, with forecasts of 5.2 to 7.8 per cent.
However, many warn the worse is yet to come.
OCBC economist Selena Ling said: “We will feel the effects of recent developments in the second quarter. It all depends on how the US economy ends up, how much the credit fallout affects the financial services here.”
Despite the sub-prime crisis hitting financial markets worldwide, Ms Ling said there were no signs of bank loans growth and tourism slowing for now.
Economists were caught off guard in the final quarter of 2007, when the Government announced a surprise 4.8 per cent decline in GDP, due mainly to volatile pharmaceutical exports.
The Monetary Authority of Singapore will also be holding its twice-yearly policy review tomorrow.
Economists widely expect it to retain its current policy stance of allowing modest appreciation in the Singapore dollar, having slightly steepened its trading band since last October.
The currency has risen 4.2 per cent this year against the US dollar, the third best performer in Asia outside Japan during the period. This effectively lowers the cost of imports, but erodes the cost competitiveness of exports. - Cheow Xin Yi
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