Singapore rebound surprises forecasters

Singapore's economy expanded in the second quarter at almost twice the pace expected by forecasters.

Gross domestic product grew at an annual rate of 12.3 per cent, the fastest rate in almost two years, after a 5.5 per cent contraction in the first quarter, said the Trade Ministry. The median forecast of 13 economists in a Bloomberg survey was for a 6.6 per cent gain.

From a year earlier, Singapore's economy expanded by 3.9 per cent, exceeding the first quarter's revised 2.8 per cent gain, yesterday's report said.

Prime Minister Lee Hsien Loong is counting on a recovery in drugs and electronics output to meet a Government forecast of as much as 4.5 per cent growth this year.

Service industries benefited from a recovery in tourism after the Boxing Day tsunami caused arrivals in Southeast Asia to slump in the first quarter.

"A weak recovery in manufacturing was bolstered by a buoyant services sector," said Chua Hak Bin, an economist at DBS Group Holdings, whose prediction of 10 per cent growth in the survey was closest to the outcome. "We're confident of a manufacturing upswing in the second half and are keeping our 2005 forecast of 4.2 per cent."

The Singapore dollar had its biggest gain in more than 10 weeks after the release of yesterday's report. The currency rose 0.4 per cent to S$1.6961 against its US counterpart.

The Straits Times Index climbed 11.32, or 0.5 per cent, to 2227.31.

A drop in drug production caused Southeast Asia's fourth-largest economy to shrink in the first quarter after expanding by 8.4 per cent in 2004.

 

Export-dependent Asian economies, including Singapore and South Korea, are slowing this year as fuel costs dampen demand in the US and Europe.

"If oil prices behave themselves the second half should be better," said J. R. Ong, managing director of First Engineering, which supplies parts to Hewlett-Packard and Seagate Technology.

Manufacturing, which accounts for a quarter of the economy, rose 3.5 per cent in the second quarter from a year earlier, compared with a revised 3.4 per cent gain in the previous three months. In 2004, manufacturing gained 14 per cent.

The Economic Development Board predicts pharmaceuticals production this year will match that of 2004, when drug output surged nearly 30 per cent.

Singapore's shipbuilders are benefiting as rising oil prices and sea-freight rates drive demand for ship repairs, new oil rigs and offshore platforms.

Tourist arrivals gained an average 8.9 per cent in the two months ended May compared with the January-February period. In the first quarter arrivals fell 9.9 per cent from the previous three months as a result of the tsunami.

Yesterday's gross domestic product estimate is largely based on data for April and May. Another report based on more complete data will be released next month.

- BLOOMBERG