`Worst is over for Singapore'

`Worst is over for Singapore'

Martin Abbugao, Agence France-Presse, Singapore

Singapore's economy is showing its first signs of recovery
with an end to a three-month decline in the crucial manufacturing
sector offering the greatest cause for optimism, economists said
on Friday.

Most economists agreed the June quarter gross domestic product
(GDP) would contract because of the impact the Severe Acute
Respiratory Syndrome (SARS) crisis had on business confidence and
the travel industry.

However, they said their hopes for a rebound in the second
half were buoyed by the news of a marked improvement on the
manufacturing outlook.

The Purchasing Managers' Index (PMI) for June rose 1.4 points
on the month to 50.8 points, ending three straight months of
decline, according to the Singapore Institute of Purchasing and
Materials Management.

A reading above 50 points means the manufacturing sector,
which accounts for a bulk of total economic output, is expanding.

DBS Bank economist Lee Wee Liat described the June PMI reading
as "the first glimmer of dawn" for the industrial sector and
offered a positive forecast for the economy as a whole.

"We are optimistic about Singapore's second half 2003
outlook," Lee said.

"The June PMI reaffirmed our view that we will see a pick-up
in the Singapore economy in the third quarter of 2003,
underpinned by a recovery in our manufacturing sector."

Lee said GDP should grow 2.6 percent in the three months to
September compared with a year earlier and expand 1.6 percent for
the whole of 2003 -- which is within the government's downgraded
target of between 0.5 and 2.5 percent.

Singapore's GDP was worth S$155.726 billion (US$89 billion) in
2002, according to official data.

"Given the indications coming out of the United States, we
would expect the PMI to be maintained above the 50 percent level
in the near future," Paul Schymyck, an economist with research
house IDEAglobal, told AFP.

"It's providing a signal that the worst is over for the
economy."

The government will release its advance estimates for three
months to June GDP on July 10 but analysts said the market would
be looking beyond the expected SARS-induced contraction during
the quarter.

"We are getting clearer signs that the economy is back on the
expansionary trail again," said Schymyck, who also pointed to
robust regional stock markets and an improvement in the housing
market take-up in Singapore.

"Of course, recovery also hinges on the U.S.," he said, citing
recent data showing the huge U.S. services sector bounced back in
June, with activity surging to the highest rate in nearly three
years.

The United States is Singapore's biggest export market.

Schymyck is projecting growth of 2.5 percent in the six months
to December and 1.1 percent for the full year.

The forecast economic rebound should also boost the Singapore
dollar, which has fallen behind its Asian counterparts in terms
of strength against the U.S. dollar, he said.

With SARS now under control in East Asia, consumption is also
expected to pick up and translate into higher orders.

"As things go back to normal, there is a lot of pent-up demand
so production will have to be stepped up," Schymyck said.

However, not all economists were so upbeat with GK Goh
Securities' Song Seng Wun saying the rebound in electronics in
the PMI index lacked conviction.

The indicator for the electronics sub-sector improved to 49.7
from 48.4 in May but was still below the 50-point benchmark.

"At this point, the June PMI only suggests very modest
expansion in overall manufacturing activity in early third
quarter. Nevertheless, we are hopeful that this modest recovery
in June orders can be sustained in the coming months."