Singapore's export-reliant economy grew slower than estimated in the first quarter as demand weakened due to a slowdown in the United States and other key markets, the government said Friday.
Gross domestic product (GDP) expanded 6.7 percent in the March quarter from the previous year, falling short of the government's preliminary estimate of 7.2 percent, the trade ministry said.
Compared with the fourth quarter of 2007, GDP, the total value of goods and services produced in a country, surged 14.6 percent. First quarter expansion was powered by a strong showing of the manufacturing sector, in particular pharmaceuticals, with construction and financial services also contributing to the growth.
The government cut its growth forecast for key exports this year to 2-4 percent from 4-6 percent as global demand is expected to remain soft through the year.
Non-oil domestic exports, a key barometer of the economy's health, rose an annual 0.6 percent in the March quarter, slower than the 2.3 percent expansion in the same quarter in 2007, as electronics shipment took a hit from easing world demand.
The government however stuck to its full-year GDP growth estimate of 4-6 percent.
"The downside risk of a deeper-than-expected US recession due to financial market turbulence or sharp declines in asset values remains on the horizon but has lessened slightly in the wake of recent strong actions taken by the Federal Reserve to restore market confidence," the trade ministry said.
"While credit conditions will remain weak and exert a drag on the real
economy, there is greater confidence now that timely and resolute policy actions will be taken (by the United States) as needed to forestall a financial meltdown."
But rising prices remained a major concern, the government said as it raised its inflation forecast to 5-6 percent this year from 4.5-5.5 percent due to the increasing costs of food and fuel.
The annual inflation rate rose to a new 26-year high of 7.5 percent in April as food, housing and transportation and communication costs soared.
Food prices alone rose 8.5 percent, transportation and communication were 7.0 percent higher and housing costs became 11.8 percent more expensive, the statistics department said.
"External price pressures have continued to contribute significantly to our domestic headline inflation numbers," the trade ministry said in a separate statement.
"Oil and food prices have risen more rapidly and are expected to remain elevated over the near term."
Oil prices surged to unprecedented record peaks of more than 135 dollars a barrel on Thursday and analysts said it could still go higher.
David Cohen, an economist with research house Action Economics, said one key risk for the economy is a more serious global slowdown, but added that the United States and other economies have so far "held up a little better than feared." - AFP/vm
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