S’pore Economy Grows 7.2% On Strong Showing In Manufacturing

Source : The Straits Times, Apr 11, 2008

Initial estimates for first quarter better than expected despite slowdown in buoyant construction sector

SINGAPORE’S economy turned out to be surprisingly resilient in the first quarter, easily beating market expectations with strong growth of 7.2 per cent.

The advance estimates issued by the Ministry of Trade and Industry (MTI) reported yesterday were a marked improvement over the 5.4 per cent posted in the final quarter of last year.

Earlier reports had suggested market expectations of 5.9 per cent growth.

On a seasonally adjusted annualised basis, the economy grew at a breakneck rate of 16.9 per cent quarter-on-quarter. It shrank 4.8 per cent in the final three months of last year.

However, economists do not believe the strong performance signifies an uptrend for the rest of the year. They point to a potential recession in the United States and rising global inflation.

The advance estimates are based largely on data from the first two months of the quarter and are intended as an early indication of growth. They are subject to revision when more comprehensive data is available, MTI said.

It said manufacturing and services were contributors to the better-than-expected first quarter growth.

Manufacturing is estimated to have expanded by 13.2 per cent in the first quarter, compared to a mere 0.2 per cent rise in the previous three months.

It was also considerably higher than the 3.9 per cent registered in the first three months of last year.

‘This was largely due to a surge in the output of the biomedical manufacturing cluster, following its contraction in the previous quarter,’ MTI said.

‘The rest of the manufacturing clusters also enjoyed better performances …with the exception of the transport engineering and precision engineering clusters, whose growth moderated.’

Another highlight was the services- producing industries which held steady at 7.6 per cent, similar to the 7.7 per cent in the previous quarter as well as in the corresponding period last year.

‘Financial services continued to be the fastest-growing among the services sectors,’ MTI said.

However, the figure for the slowing construction sector was less rosy with growth slipping to 14.6 per cent from 24.3 per cent in the preceding quarter.

United Overseas Bank economist Ho Woei Chen said this was disappointing, given the sector’s strong run of late. ‘It was a bit of a disappointment after three quarters of growth above 20 per cent.’

But she still expected the sector to contribute to growth this year, on the back of infrastructure projects such as the integrated resorts and the proposed Sports Hub in Kallang.

Citigroup economist Chua Hak Bin said the overall growth figure for the first quarter was slightly below the bank’s expectations of 7.8 per cent, but he was surprised at the strength of the services sector. ‘I thought services might have softened but it is holding up fairly well.’

He was less positive about the rest of this year, saying that the first-quarter figures were unlikely to provide a telling picture of what lies ahead. ‘A US recession is in the works and chances are it could be a prolonged one.

‘This will affect exports and add to the credit stress facing Singapore companies, which are already finding it harder to secure financing from banks, which are more careful with lending in the wake of the global credit crunch.’

CIMB-GK economist Song Seng Wun said that rising inflation, especially for food prices, will be a major concern.

‘People are focusing on issues such as the rising price of rice and this is something that could persist for the rest of the year.’

None of the economists interviewed was inspired to revise full-year growth forecasts, which range from 4.7 per cent to 5.5 per cent. MTI has forecast a range of 4 per cent to 6 per cent for the year.