HSBC Expects Sharp Rebound For Singapore

Source : The Business Times, January 14, 2009

Economy could grow as much as 5.5% in 2010, from 1.2% contraction this year

SINGAPORE will be among the worst-hit Asian economies this year, but it is also likely to be one of the earliest to rebound strongly, HSBC economists said yesterday.

Another point of view: The Singapore government expects a slow recovery from the current downturn, instead of the more rapid rebound that HSBC is forecasting

Strong policy measures here and elsewhere, as well as sharply lower commodity prices, will support investment and consumer demand in the region, likely leading to a pickup in economic activity here in the second half of the year, said Robert Prior-Wandesforde, the bank's senior Asian economist based in Singapore.

'History suggests that when the economy does turn, it turns sharply,' he told reporters at a briefing.

He expects Singapore's economic output - as measured by gross domestic product or GDP - to shrink by 1.2 per cent for the full year - but believes that the economy will have begun to expand again by the fourth quarter.

He predicts that in 2010, the economy will be growing rapidly once more, expanding by 5.5 per cent for the full year.

The government's own economic forecast is for a contraction of up to 2 per cent or growth of up to one per cent this year, though it expects a slow recovery from the current downturn, instead of the more rapid rebound that HSBC is forecasting.

Many private-sector economists are already more bearish than that. Deutsche Bank's chief economist for Asia, Michael Spencer, suggested earlier this week that Singapore's economy could contract 4.5 per cent this year, the worst slump in full-year GDP ever.

But Mr Prior-Wandesforde said that measures expected to be announced in the Singapore Budget next week, and stimulus plans by other countries in Asia, should help to boost region-wide demand for goods and services later in the year, paving the way for a recovery in the economy.

Singapore is also likely to benefit from the recent steep falls in the price of oil and other commodities, which should mean more disposable income for people to spend on other goods and services, he added.

Separately, Stephen King, HSBC's group chief economist told BT yesterday that he was optimistic that the concerted economic stimulus packages announced by countries worldwide, including the US and China, would cushion the impact of the financial crisis on economic activity - at least temporarily.

But Mr King, who was in Singapore to meet the bank's clients here, added that he was worried about a rise in protectionism that could damage future economic prospects worldwide.

'The danger of a knee-jerk reaction is that globalisation goes into reverse,' he said. 'If we move into a more protectionist environment, that will point to lower long-term growth.'