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.