Singapore's Full-Year Growth Likely To Be At Lower End Of 4-5% Range

Source : Channel NewsAsia, 11 August 2008

Singapore's full-year economic growth is likely to come in at the lower end of the newly-revised 4 to 5 per cent range.

This is according to the Ministry of Trade and Industry (MTI).

Singapore's GDP grew by 2.1 per cent on-year in the second quarter, down from the 6.9 per cent pace in the first three months of this year.

Growth for the first half was 4.5 per cent, with construction and the services sectors remaining the pillars of support for the economy.

But weak semiconductor demand is expected to weigh on Singapore's key electronics sector for the rest of the year.

This, together with strong competition and drug approval delays in biomedical manufacturing, is expected to pull back growth.

Kit Wei Zheng, vice-president for Asia-Pacific economic and market analysis at the Citicorp Investment Bank, said: "In addition, I think the lag effect of the previous appreciation of the Singdollar will likely weigh on growth in the second half of the year."

Just a few days ago, the government narrowed its forecast for full-year economic growth to between 4 and 5 per cent, bringing it in line with numbers from most private sector economists.

But there are those who say there is reason to stay positive, despite weakening exports.

Mr A Prakriti Sofat, an economist at HSBC, said: "We do not think that just slowing exports automatically mean that the domestic economy would also go down with it. When you look at fundamentals within the Singapore economy, jobs and wage growth are both running at double digits, so labour market is obviously extremely tight."

HSBC added that low nominal interest rates and a strong growth in HDB prices are also a signal of the country's strength.

HSBC is among the more optimistic, with its forecast for full-year growth at 5.8%, though it says it may nudge down its prediction.

MTI says it expects to see job losses in sectors like manufacturing by year-end if the economy continues to weaken. It says, however, that it is unsure of the magnitude of these potential job losses.

While MTI says it is too early to tell how 2009 will fare, some economists think the outlook is cloudy.

Citicorp Investment Bank's Kit Wei Zheng said: "Right now most of the market is still expecting faster growth next year compared to this year. But this could give way to further growth slowdown next year. First of all, I think, growth slowdown in Europe, Japan is more pronounced."

Citi added that the inflation issue in Asia will likely see central banks tightening monetary policy, further slowing growth in the region.

It expects Singapore to grow at 3.9 per cent next year, lower than the consensus 5.3 per cent. - CNA/yb/ir