More signs that the Asian region is out of the slump with Singapore lifting its 2009 growth forecast after GDP grew for a second consecutive quarter.
The country’s trade ministry revealed the news yesterday.
As a result it said the economy will now shrink between 2% and 2.5% in 2009, down from the earlier forecast for a contraction of 4% to 6%.
The ministry said its preliminary report on the September quarter was for growth of an annualised 14.9% from the June quarter.
Year on year the economy grew 0.8% in the quarter, the ministry said.
"Growth was driven by the continued expansion of biomedical and electronics manufacturing output, and improvements in the trade-related and tourism sectors of the economy on the back of a gradual stabilisation in global economic conditions," the statement said.
But it warned that the recovery could only be sustained next year by a recovery in demand in the major economies, such as Europe and the US.
Therefore economic activity will remain below trend.
The Monetary Authority of Singapore (known as MAS) also maintained a neutral stance in its twice-yearly currency policy review yesterday, favoring neither appreciation nor depreciation of the Singapore dollar against a basket of currencies.
The central bank had revealed a small devaluation of the dollar in April to help reverse the collapse in exports.
"Advance estimates show that in the third quarter of 2009, Singapore’s GDP expanded by 14.9 per cent on a seasonally-adjusted quarter-on-quarter annualised basis, following a 22.0 per cent expansion in the second quarter of the year, yesterday’s statement from the Trade Ministry said.
"In year-on-year terms, the economy grew by 0.8 per cent, compared to a 3.2 per cent contraction in the preceding quarter.
"The manufacturing sector expanded by 35 per cent on a seasonally-adjusted quarter-on-quarter annualised basis, on the back of the previous quarter’s spike of 59 per cent.
"This increase was primarily due to a continued surge in the production of higher value active pharmaceutical ingredients in the biomedical manufacturing cluster.
"The electronics cluster also grew, due to continued restocking activities and uptick in consumer demand for electronic devices.
"However, the construction sector declined by 0.6 per cent compared to an expansion of 33 per cent in the previous quarter, because of slower construction activity for industrial building projects.
"The services producing industries expanded by 9.5 per cent on a seasonally-adjusted quarter-on-quarter annualised basis in the third quarter of 2009, compared to a 8.3 per cent increase in the preceding quarter.
"The trade-related and tourism sectors (viz. wholesale & retail trade, transport & storage, and hotels & restaurants) improved on the back of a recovery in global trade flows and international travel.
"The financial services sector posted modest growth, supported by domestic and offshore non-bank lending and insurance business."
Looking to the next year the ministry said:
"A clear but modest recovery is underway globally, at least for the next three or four quarters.
"One-off factors such as restocking activities and fiscal stimulus measures will continue to support growth in the near term.
"However, economic activity will probably remain below pre-crisis levels because of the drag on demand in the developed economies posed by high levels of spare capacity and tight credit conditions.
"A sustained recovery in private consumption and investment in the developed economies is needed to support growth momentum into the second half of 2010.
"However, high unemployment and stagnant incomes will weigh down on private demand.
"Uncertainties over the pace of the withdrawal of monetary and fiscal stimulus measures pose an additional risk.
"While these factors may dampen growth in the second half of 2010 and result in an uneven recovery, the likelihood of a return to recessionary conditions is low in the absence of further financial shocks."
Singapore’s economic prospects in 2010 will be closely tied to the conditions in the external environment.
"The manufacturing sector will be supported by inventory cycle adjustments and any uplift in private final demand in the external economies.
"Trade-dependent sectors are likely to continue to benefit from a gradual resumption in global and regional trade flows in 2010."
In effect the Ministry is saying GDP growth next year is expected to be slower than in previous post-recession periods.
So no V-shaped rebound here in 2010.
