S'pore economy rebounds with 3.2% rise in second quarter

S'pore economy rebounds with 3.2% rise in second quarter

Chris Foley, Associated Press, Singapore

Singapore confirmed a rebound from recession with strong 3.2 percent second quarter economic growth in the first year-on-year rise for 15 months, according to snap estimates released Wednesday.

But economists warned that while figures for the crucial manufacturing sector were stronger than expected, the recovery was not broad-based.

The growth in the three months to June, which followed a decline of 1.5 percent in the first quarter, was at the upper end of economists' estimates. However, it was driven by growth in the chemicals sector, which accounts for only 12 percent of manufacturing.

On an annualized quarter-on-quarter basis, the economy grew 10.3 percent compared to 8.4 percent in the previous quarter.

"Basically the economy is on the recovery track. It looks good, especially quarter-on-quarter. This indicates the momentum is there," said DBS Bank economist, Kaan Quan Hon.

But a 133 percent year-on-year surge in May's biomedical sciences production was unlikely to be sustained, he added.

Although the result was not enough for the government to lift its two-to-four percent growth forecast for the full year, the trade and industry ministry expressed confidence in reaching the upper end of the estimate.

"The substantial improvement can be attributed mainly to an exceptional surge in activity in the chemicals cluster, whose quarterly performances are typically volatile," the ministry said.

"This resulted in a strong but narrowly-based rebound in the manufacturing sector."

Output by goods producing industries is estimated to have expanded by 7.5 percent during the quarter from a year earlier, the sector's best performance since the 2000 boom.

This followed a 4.4 percent decline in the previous quarter and double-digit retractions in the two quarters before that.

But Kaan at DBS said that while the numbers looked good, they needed to be put into perspective, with the spotlight on the comparatively small chemicals cluster.

"The recovery is still uneven. We don't expect a quality improvement until next year," he said, adding that GDP this year may surprise by exceeding his four percent estimate.

The 3.2 percent growth was stronger than market expectations, agreed Steve Brice, chief economist at Standard Chartered Bank which has set its growth forecast for the year at 3.5 percent from an earlier 2.5-3.5 percent.