July 11, 2007
All-round strength powers economy to 8.2% growth
Economists hail strong showing despite woes of electronics sector
By Bryan Lee
SINGAPORE'S booming economy has thrashed all predictions with 8.2 per cent growth last quarter over the same period last year - its fastest pace in 15 months.
Economists say the Government may well lift the official growth forecast for the full year on the back of the dazzling performance.
They say the strong showing in the April 1 to June 30 quarter is all the more impressive because it came even though the electronics sector is still in the doldrums.
Until recently, electronics was the backbone of manufacturing and the economy here, especially electronics exports to the United States. Tough times at electronics factories invariably flowed through to the wider economy.
Not so now, say economists, as Singapore has succeeded in diversifying its economy to new sectors such as pharmaceuticals and other higher-end industries.
'Singapore is by no means dependent on the vagaries of the United States technology cycle,' said HSBC economist Richard Prior-Wandesforde. 'It can clearly not just survive but thrive while this sector is stuck firmly in the doldrums.
'Let the good times roll.'
No specific figure on electronics was given in the latest preliminary figures from the Ministry of Trade and Industry (MTI) released yesterday.
But economists said output has been flat amid anaemic exports of computer chips and other peripherals. World demand is expected to improve in the second half of the year, but not dramatically.
Economists said the strong second-quarter economic showing was powered by all-round strength - especially in non-electronics manufacturing and construction.
Overall economic growth this year is likely to be closer to last year's impressive 7.9 per cent, they said, after yesterday's figures showed an acceleration from a revised 6.4 per cent first-quarter growth.
This should translate into higher salaries and company profits, and lend further support to the booming property market, the economists said.
Mr Prior-Wandesforde said that Singapore's economic output 'not only improved in the second quarter, as the market expected - it boomed'. He is raising his full-year forecast from 6.3 per cent to about 8 per cent.
Other economists are also bumping up their predictions, and many reckon that the official forecast could be raised to between 6 and 8 per cent. The official forecast is now 5 to 7 per cent.
Expectations have been on the rise since recent data showed a strong rebound in factory output.
With manufacturing back in action after being the weak link in the first quarter, predictions by private economists for second-quarter economic growth had been raised to between 6 and 7 per cent before yesterday's figures.
As it turned out, manufacturing surged 10.2 per cent, beating expectations and the previous quarter's 4.4 per cent. Fuelling this was strong growth in the production of drugs, oil rigs and ships, said the MTI.
The construction sector turned in explosive 17.9 per cent growth - the fastest pace in 10 years. Boosted by the ongoing property boom, builders and suppliers look set to return to the good times they enjoyed before they were hit by the 1997 financial crisis.
'With activities and progress payments likely to accelerate when work begins on the two casinos and other developments, this sector could continue to spring nice surprises,' said Mr Song Seng Wun of stock brokerage CIMB-GK.
The property boom was also felt elsewhere: The services sector clocked 7 per cent growth, partly because banks benefited from lending more money to home buyers.
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