S'pore GDP grows fast

S'pore GDP grows fast

Bernice Han, Agence France-Presse, Singapore

Singapore's economy posted its fastest quarterly expansion in 10 years as exports boosted growth in the June quarter to 12.5 percent from a year ago, lifting the full 2004 forecast to 8.0- 9.0 percent, the government said on Tuesday.

But gross domestic product (GDP) growth is expected to slow to 3.0-5.0 percent in 2005 due to the exceptionally high base this year and moderation in global electronics demand, the Ministry of Trade and Industry (MTI) said.

"The moderation of growth in 2005 is in line with the expected deceleration of the world economy and global electronics industry," Friedrich Wu, director of the MTI's ecomomic division, told a media conference.

"In addition, the very robust expansion of the economy in 2004 will imply slower growth next year partly attributable to the high base effect," he said.

The revised 2004 growth estimate means the economy is on track to be one of the fastest-growing in Asia this year after expanding a mere 1.1 percent in 2003. The previous 2004 forecast was 5.5-7.5 percent.

Growth in the second half is likely to come in at 6.0-8.0 percent after expanding 10 percent year-on-year, Wu said.

"We believe that the revised growth range is credible and realistic because even if quarter-on-quarter growth in the third and the fourth quarters were to be zero compared to double-digit rates in the first and second quarters, full-year growth would still reach 8.5 percent," Wu said.

Wu said the lower end of the revised growth forecasts factored in the "unlikely possibility" of the last two quarters of 2004 remaining in neutral territory.

The factors that pushed the economy to dizzying heights in the first six months of the year, namely strong export orders for electronics and solid global economic conditions, will remain the key growth drivers for the rest of the year and also in 2005, Wu said.

Moreover, the composite leading index, which tracks economic activity six to nine months ahead, increased for the fifth straight quarter in the three months to June.

"This is good news for a trade-dependent economy," Wu said.

"The series of gains in the leading index suggests that the momentum of growth will remain strong well to the end of this year."

This year's rebound comes off a low base in 2003 resulting from the economic impact of the Severe Acute Respiratory Syndrome (SARS), a flu-like epidemic which grounded the travel industry and crippled retail and other sectors as well in East Asia.

Manufacturing was again the star performer as the sector accelerated by 20.6 percent in the June quarter from a year ago, eclipsed only by the hotels and restaurants sector which surged 37.6 percent.

On a quarterly basis, the sector grew 30.3 percent compared with a rise of 12.3 percent in the first quarter.

Robust export demand for electronics and biomedical products is not expected to ease up in the second half, which bodes well for the manufacturing sector, the backbone of Singapore's S$90- billion economy.

"The continuing growth momentum suggests that the recent strength of manufacturing output will be sustained in the second half of 2004," Wu said.

All other sectors of the economy also expanded in the June quarter except for the construction industry, which fell 5.1 percent.

Private economists were however less bullish, saying the manufacturing sector was highly vulnerable to a weakening in demand for electronics products especially from the United States.

"I think the numbers are a little bit too aggressive," Joseph Tan, economist at Standard Chartered, said of the revised growth projections.

"Growth will invariably slow down in the second half... oil prices being above S$40 pose significant risk to Asian economies," he said.

Tan said he was maintaining his 7.6 percent growth forecast for the Singapore economy this year.