Singapore now sees its economy solidly back in the black in 2010 after confirming that it grew strongly in the third quarter.
The country’s Trade and Industry Ministry issued a flash third quarter estimate in early October which signalled the rebound out of the red of the second quarter.
Yesterday’s statement confirmed it and firmed up a growth figure for next year.
Singapore has emerged as something of an advanced indicator for Asia, given that its economy is highly exposed to exports, especially in advanced manufactured goods such as electronics and drugs.
It was the first economy to reveal the extent of the terrible slide in the first quarter of this year and the first economy to confirm that things had started improving.
Therefore its news yesterday of solid growth for 2010 is good news for the region.
The Ministry said the Singapore economy will grow between 3% and 5% in 2010, up from the estimated contraction this year of 2% to 2.5% (subject to what happens this quarter).
"Preliminary estimates show that the Singapore economy grew by 0.6 per cent on a year-on-year basis in the third quarter of 2009, compared to a contraction of 3.3 per cent in the second quarter, The Ministry said yesterday.
"On a seasonally adjusted annualised quarter-on-quarter basis, the economy expanded by 14.2 per cent in the third quarter of 2009, following growth of 21.7 per cent in the second quarter, with all major sectors registering positive growth.
"The expansion was led by the manufacturing sector, which grew by 26.6 per cent on a quarter-on-quarter annualised basis.
"Increased production of higher-value pharmaceutical ingredients resulted in a continued surge in biomedical manufacturing output, while the electronics cluster grew modestly on the back of continued restocking activities and an uptick in consumer demand for electronic devices.
"The services-producing sectors also saw broad-based improvement, with sequential growth accelerating to 10.8 per cent from 7.9 per cent in the previous quarter.
"The trade-related and tourism sectors (viz., wholesale & retail trade, transport & storage, and hotels & restaurants) posted double-digit sequential growth, as global trade flows improved and international travel picked up.
"However, the pace of growth in the financial services sector moderated to 3.9 per cent from 22.5 per cent in the previous quarter.
"The construction sector slowed down, growing by just 0.9 per cent compared to the growth of 32.7 per cent in the previous quarter. This moderation reflects a reduction in certified payments received for on-going real estate development projects.
"The preliminary estimates for the third quarter are in line with the advance estimates published on 12 October 2009, reflecting gradually stabilising global economic conditions."
Malaysia and Thailand are due to release GDP figures in the next week and both are expected to report better figures, although they will still be in the red.
Singapore’s Monetary Authority, the central bank, last month said that it would maintain a zero appreciation stance so far as the Singapore dollar was concerned.
That is in effect maintenance of the de-facto devaluation of the Singapore dollar in April which has been done to boost exports. It echoes what China is doing with the Yuan.
The government also extended a wage subsidy program for employers that were set to expire this year to avoid an increase in job losses.
The Ministry warned that Singapore’s outlook for 2010 is “closely linked” to global conditions and a “sluggish recovery” in demand for the island’s goods will moderate growth prospects.
"Global economic developments suggest that the recession has ended in most countries. GDP growth in key economies around the world has turned positive, bolstered by unprecedented policy responses which spurred domestic spending. Industrial production has started to pick up gain, while financial conditions and trade flows have corrected from their earlier lows, though not to pre-crisis levels.
"Asia is likely to continue to post positive growth rates, driven by domestic consumption and intra-regional trade flows.
"However, the recovery in the advanced economies remains fragile, and the return towards pre-crisis levels of output is likely to be gradual.
"Growth momentum thus far has been driven by targeted fiscal stimulus measures and inventory cycle adjustments, but these factors are likely to taper off in the second half of 2010.
"Even though there are some initial signs of a recovery in private demand, the durability of the recovery remains uncertain.
"Weak household balance sheets and persistently high unemployment, especially in the US, will continue to weigh on consumer demand.
"High levels of unused capacity and tight credit conditions in the US and Europe suggest that business investment is also unlikely to grow strongly next year.
"A sluggish recovery in final demand in the advanced economies will moderate Singapore’s growth prospects in 2010. MTI expects Singapore’s economic growth in 2010 to be 3.0 to 5.0 per cent.
“Growth momentum thus far has been driven by targeted fiscal stimulus measures and inventory-cycle adjustments, but these factors are likely to taper off in the second half of 2010,” the ministry said.
Manufacturing, which accounts for about a quarter of the e
