Singapore’s economy likely to be buoyed by global recovery in 2010

Source : Channel NewsAsia – 21 Dec 2009

Singapore’s economy is expected to revert to positive growth next year, thanks to the global recovery.

According to some economists, growth could even surpass the government’s estimates for 2010. They are looking at GDP growth of more than 5 per cent, compared to the government’s current forecast of a 3 to 5 per cent growth.

This follows 2009’s roller coaster ride, where the economy took a beating in the early part of the year before recovering in the second half.

Export-dependent Singapore was among the first in Asia to fall into recession towards the end of 2008. The economy contracted by 14.6 per cent on-quarter in the first quarter of 2009, following a decline of 16.4 per cent in the previous three months. Then it took a sharp turn upwards, catching the markets by surprise.

David Cohen, director of Asian economic forecasting, Action Economics, said: “The rebound has been better than expected. The strong growth in the second and third quarter GDP in Singapore was better, at a double-digit quarter-on-quarter annualised rate.

“It was a reflection of the turnaround. It was more or less in line with the pattern around the region where many of the Asian exporting economies, after the sharp fall-off in their production and exports in the beginning of the year, rebounded as global demand started to recover.”

Song Seng Wun, CEO & regional economist, CIMB-GK Research, said: “After a fairly weak start to the year in the aftermath of the collapse of global demand, we saw things improving in subsequent quarters…

“Aggressive intervention by the Singapore government and others around the world stabilised an uncertain environment. When you have heavy government intervention in the economy, it gives confidence back to businesses and consumers as well.”

While the outlook for 2010 appears to be brightening, some said much depends on the United States and when global central banks will cut liquidity.

“Which is why there is much debate on whether governments should withdraw liquidity, withdraw from the economy. It’s probably a bit premature. The risk really is that the number one engine, the US, continues to see patchy recovery,” said Mr Song.

Sector-wise, manufacturing was the worst hit by the downturn in 2009, but it is looking up.

The manufacturing sector, which accounts for about a quarter of the country’s GDP, is expected to grow by about 8 per cent in the fourth quarter this year, after a surprise rebound in the third quarter. This performance is expected to continue into 2010.

Mr Cohen said: “Assuming the global economy remains on recovery trajectory, that should support continued recovery in manufacturing sector and this, including the electronics sector globally, should turn around.

“Perhaps Singapore will still be feeling some drag from the closing of some disk drive production sites, but that should be balanced by the continued uptrend in the pharmaceutical area, where Singapore continues to enjoy an expansion in the global industry that is expected to continue into next year.”

Meanwhile, all eyes will also be on the much-anticipated opening of Singapore’s two integrated resorts. They are expected to add about 0.5 per cent to GDP growth next year, through a boost to tourist arrivals and retail sales.