S'pore grows at fastest rate since Asian crisis

S'pore grows at fastest rate since Asian crisis

Karl Malakunas, Agence France-Presse, Singapore

Singapore's economy expanded at its fastest pace since before
the 1997-98 Asian crisis during the second quarter, posting year-
on-year growth of 11.7 percent, the government said on Monday.

Although the figures were off a low base due to the Severe
Acute Respiratory Syndrome (SARS) crisis last year, quarter-on-
quarter growth was still an impressive 9.1 percent.

The strong performance led economists to revise upwards their
growth forecasts for the year to be significantly higher than
current government projections of 5.5-7.5 percent.

"It needs a recession in the second half to achieve the bottom
end of the government's forecast," the head of IDEAglobal
research house, Nizam Idris, said.

"Even to hit the top end of the government's range there has
to be a significant slowdown."

The last time Singapore's economy grew at a faster pace was
during the first three months of 1996, when it recorded 12.4
percent growth, more than a year before the Asian economic crisis
struck.

Aside from SARS, the Trade and Industry Ministry said the
strength of the global economy was a significant factor for
Singapore's strong performance.

"The high year-on-year growth rate was indicative of the
economy's recovery from the severe impact of SARS a year ago as
well as the continuing pickup in global economic activity," the
ministry said.

The manufacturing sector, the lynchpin of the local economy,
grew 18 percent year-on-year in the second quarter, with the
vital electronics sector remaining a significant source of
growth.

The service sector similarly did well, growing 11 percent,
largely due to the rebound from SARS, which brought the city-
state's travel and tourism industry to a virtual standstill in
April and May last year.

Singapore's economy contracted by 3.9 percent in the second
quarter of 2003.

"The resumption of international travel had a particularly
strong positive impact on the hotels and restaurant sector, as
well as the transport and communications sector," the ministry
said.

The only poorly performing sector of Singapore's economy was
the construction industry, which recorded a contraction of 4.5
percent after growing 2.0 percent in the first quarter.

The figures released are preliminary estimates based on the
first two months of the quarter. The final second quarter numbers
will be released next month.

Low Ping Yee, an economist with Singapore's United Overseas
Bank, said second quarter growth of 11.7 percent was nearly one
percentage point higher than she had expected, mainly due to the
surprising strength of the service sector.

Low revised her full-year growth forecast from 6.8 percent to
7.8 percent, with the expansion pace expected to moderate to
about 6.0 percent over the second half of 2004.

Low said the quarter-on-growth of 9.1 percent was the fourth
consecutive quarter of near double-digit expansion, a stretch she
described as "unprecedented".

IDEAglobal's Nizam was even more upbeat, predicting economic
growth of 8.5 percent this year, adding this was his second
upwards revision of his forecast and there could well be another
in the coming months.

Nizam said he expected the government to revise its target
next month from 5.5-7.5 percent to 7.0-9.0 percent.

Nizam attributed Singapore's stellar performance this year to
the government's economic restructuring following the Asian
economic crisis, particularly the streamlining of the
manufacturing sector.

He said the shift of focus away from low-end manufacturing
jobs to the higher, value-added sector, particularly in the
biomedical segment, was now paying dividends.

"Strong global demand has helped but you need a well-oiled
engine to capitalize on that," Nizam said.