Singapore Raises 2010 GDP Forecast

Jakarta Globe, Bernice Han, April 14, 2010

Singapore. The Singapore government said on Wednesday it expected economic expansion of up to 9 percent this year, sharply raising its forecast as the city-state staged a dramatic turnaround from recession.

The Ministry of Trade and Industry said gross domestic product was seen expanding 7 percent to 9 percent this year, higher than its previous forecast of 4.5 percent to 6.5 percent.

Trade-reliant Singapore’s revised growth target came amid signs that the global economy was continuing to recover from the financial and economic crisis that struck in late 2008 and extended well into last year.

Singapore’s economy, the first in Asia to go into recession, contracted 2 percent last year as the crisis hit demand for its exports.

Preliminary estimates computed mainly from January and February data showed first quarter GDP expanded 13.1 percent from a year ago and 32.1 percent on a quarter-on-quarter seasonally adjusted basis.

The first quarter surge marked a strong turnaround from the same period last year when GDP shrank 9.4 percent annually and 7.1 percent from the previous three months.

Singapore’s strong first-quarter showing surprised even the economists who had predicted an average year-on-year expansion of 10.8 percent.

“All cylinders were firing with all key sectors registering very strong growth,” analysts from Singapore’s DBS Bank said in a report. The bank, which last week upgraded its full-year outlook for Singapore to 7 percent from 6 percent, said it would revise the forecast again in light of the strong first-quarter performance.

“This is supernormal growth,” DBS said.

Manufacturing led the way with a 30-percent year-on-year expansion in the first quarter as external demand for information technology products improved. Construction grew 11.3 percent annually and services-producing industries surged 8.4 percent, the trade ministry said.

“While downside risks remain, such as a European sovereign debt crisis or a slowdown due to removal of fiscal measures, these have been outweighed by strong signs global economic conditions are improving,” it said.

The Monetary Authority of Singapore said on Wednesday that it was adopting a tighter monetary policy stance to tame inflation as the economic recovery gains traction.

Rather than manipulating interest rates, Singapore’s monetary policy is conducted via the local currency, which is traded against a basket of currencies of its major trading partners within an undisclosed band known as the nominal effective exchange rate.

MAS, the country’s central bank, said it “will shift the policy band from that of a zero percent appreciation to one of modest and gradual appreciation.”

“The move is fully justified not only by the enormous strength of first quarter GDP but the likely sustainability of the recovery,” said Robert Prior-Wandesforde, senior Asia analyst for HSBC.

Agence France-Presse