Singapore seen posting strong Q1 GDP growth

Singapore seen posting strong Q1 GDP growth! Indicators point to good growth though confidence may be weak: economists
By ANNA TEOBUSINESS

Confidence may be weak, but the domestic economic growth outlook remains strong, according to at least two economists. Mr Basu: Forecasts first-quarter GDP growth of 8.4 per cent Daiwa Institute of Research’s chief economist (Asia ex-Japan) P K Basu - who from day one was unfazed by the sharp slowdown towards the end of 2007 - has forecast first-quarter GDP growth of 8.4 per cent. That’s well above the consensus estimates of sub-6 per cent.

‘I haven’t changed my view one iota since the start of the year (and in fact since last year), and I think the data is bearing me out so far,’ he told BT yesterday.

The Ministry of Trade and Industry will release advance estimates of Q1 growth - based only on January and February data - tomorrow.

GDP growth slowed to 5.4 per cent in Q4 2007, mainly because of a plunge in biomedical manufacturing. Against the preceding quarter, the economy shrank 4.8 per cent in Q4. Barring an unexpected plant maintenance shutdown, the manufacturing sector is likely to have bounced back to double-digit year-on-year growth after contracting in Q4 2007, says Mr Basu.

Business confidence may have weakened, but the activity indicators suggest ‘very few pockets of real weakness in the economy’, he says, citing the commerce and transport and communications sectors in particular.

Data for the first two months of the year shows ’surging tonnage of vessel arrivals, stronger tourist arrivals, better retail sales, and stronger re-exports and trade volumes than in any quarter of last year’, he notes.

Construction contract awards also suggest that the building boom will persist through to at least early-2009, he adds.

The growth pace in construction and financial services likely slowed from the frenetic pace seen in the second half of 2007, but should still be at a double-digit level, he expects.

The only weakness? Growth in property transactions.

HSBC’s Robert Prior-Wandesforde also reckons that the economy will see double-digit quarter-on-quarter growth in Q1 as the pharmaceutical industry rebounds.

‘Although confidence is lacking right now, the fundamentals for domestic growth generally remain extremely favourable,’ he said in a report last Friday.

And, with loans growth running at close to 20 per cent, there is also little evidence of credit constraints, he said.

Still, he suspects that the Monetary Authority of Singapore is probably more worried about the growth outlook given the uncertainties, and with consumer price inflation peaking soon. He expects the monetary policy of ‘modest and gradual’ currency appreciation to stay but with the band widened.
Source : Business Times - 09 April 2008