Strong 3rd quarter for construction and manufacturing puts full-year target within reach
THE economy grew by a blistering 9.4 per cent in the third quarter, trumping analysts' forecasts and beating the bumper numbers racked up in the previous three months. Construction and manufacturing drove the rapid expansion, which has left the country well-placed to hit its official 7 per cent to 8 per cent growth forecast for the year.
'The first three quarters this year saw an average 8.2 per cent growth. So the official forecast is very much in the bag,' said Standard Chartered Bank economist Alvin Liew.
The figures - advanced estimates based largely on July and August data - were released by the Ministry of Trade and Industry yesterday.
They were higher than economists' median forecasts of 9 per cent, and follow the 8.7 per cent expansion charted in the April to June period.
Construction and manufacturing grew by double-digits from a year ago, while growth in the services sector eased to 8.1 per cent from 8.4 per cent in the previous quarter. Financial services was again the star performer.
Deutsche Bank economists noted: 'We think that the construction sector will provide continued impetus to growth in 2007 and 2008, while weaker external sector outlook will pose some downside risk.'
Also yesterday, the Monetary Authority of Singapore (MAS) made a surprise move to allow the Singdollar to strengthen at a slightly faster pace.
The move, prompted by persistent inflationary pressure, took economists off guard.
They had expected no change to the exchange rate policy in the central bank's biannual policy review.
A stronger currency helps to curb inflation by making imports cheaper.
The MAS is sticking to its policy of a 'modest and gradual appreciation' of the Singdollar against a basket of currencies, but it will 'increase slightly' the slope of its policy band - meaning a faster rate of appreciation.
The steeper Singdollar band 'signals that inflation concerns now outweigh growth concerns', said StanChart's Mr Liew.
In its outlook for this year and 2008, the MAS noted that growth prospects in the United States have weakened.
'However, the global economy is expected to remain resilient, particularly in Asia, where domestic demand and regional trade should continue to be firm,' it said.
The MAS predicts that Singapore's economic growth will come within its potential of between 4 per cent and 6 per cent next year.
It projects that inflation will rise to about 3.5 per cent year-on-year in the first half of next year, partly due to July's goods and services tax hike.
'In the second half, inflation should ease and come in at 2 to 3 per cent for 2008 as a whole,' it predicted.
The Government will release preliminary gross domestic product estimates for the third quarter based on more complete data next month.
MAS TO LET S$ STRENGTHEN FASTER TO COOL RISING INFLATION, MONEY
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