Singapore economy shrank by 2.6 percent in first quarter
Singapore economy shrank by 2.6 percent in first quarter
Agence France-Presse, Singapore
Singapore's economy shrank 2.6 percent in the first quarter in a worse than expected performance amid weak electronics demand, government figures showed Wednesday.
Although the market reacted negatively to the year-on-year data, economists said the figures -- the best since the first half of last year -- showed Singapore was continuing to move out of recession.
"This is below the market forecast for a 2.0 percent year-on- year decline. However, the recovery is on track and will gather steam ahead," DBS Bank economist Kaan Quan Hon said.
While the 2.6 percent figure, a snap estimate computed largely from January and February data, reinforced other data showing a build up of growth momentum, concern remained over the performance of manufacturing, which was estimated to have contracted 6.1 percent.
"This was largely due to a decline in the manufacturing sector as a result of sluggish demand for electronics," the ministry of trade and industry said of the GDP figure in a statement.
The export-oriented manufacturing sector is the engine-room of Singapore's economy, with electronics accounting for 60 percent of non-oil domestic exports.
Service industry output was estimated to have declined marginally by 0.7 percent in the first quarter while other sectors showed "an improvement in line with a pick up in economic conditions," the ministry said.
Kaan said Singapore could show full-year economic growth around four percent this year, higher than the government's one to three percent forecast, but the effects would not become evident for several months.
"While the economic numbers are improving, companies will only feel the pick-up in business activity later this year," he said.
"The market has largely priced in the recovery. Earnings must now deliver, particularly organic earnings growth. We expect further near-term weakness in the local bourse."
In a sharp reaction to the gross domestic product (GDP) estimates, the Singapore exchange fell 2.2 percent exposing a weakness in blue chips and technology shares.
The key Straits Times Index lost 38.91 points to end at 1,715.35.
IDEAglobal economist Paul Shymyck said Singapore's recovery was not robust and it could be the third quarter before positive year-on-year growth emerged.
"I think the economy is not staging a strong recovery. The performance was helped by the pharmaceutical industry which is very volatile, rather than the electronics industry," Shymyck said.
With Singapore lurching last year into its worst recession in more than 30 years, the 2.6 percent fall in GDP compares favorably against a 6.6 percent drop in the fourth quarter of last year and a 5.4 percent contraction in the quarter before that.
GK Goh regional economist Song Seng Wun said the first quarter estimate showed a 4.0 percent expansion from the fourth quarter of last year, meaning the economy had expanded for two consecutive quarters.
The GDP figures came out the day before a high-powered economic review committee releases a blueprint expected to recommend a cut in corporate and personal tax and an increase in the goods and services tax.