Singapore's Q1 GDP growth beats forecast on strong manufacturing sector
Thomson Financial
Singapore
Thursday, 10 April 2008, 02:44 GMT
Singapore's economy expanded at a forecast-beating 7.2% in the first quarter from a year earlier, led by a double-digit rebound in manufacturing, advance estimates by the Ministry of Trade and Industry (MIT) showed Thursday.
Economists polled by Thomson Financial were expecting an average 6.4% rise in the first quarter, with forecasts ranging from 5.2% to 7.8%. Growth in the fourth quarter was at 5.4%.
Seasonally adjusted, growth was much more robust at 16.9%, rebounding from the fourth quarter's 4.8% contraction, the ministry said.
"This was line with expectations of a rebound after weakness in the fourth quarter, which has been concentrated in manufacturing. They were assuming healthy manufacturing numbers in March but this does not alter the basic story [that there will be] moderation in growth in 2008," said David Cohen, chief economist at Action Economics.
The advance estimates by the ministry were based on available economic data for the first two months of the quarter.
According to the estimates, the manufacturing sector expanded by 13.2% in the first quarter from a year ago, sharply higher than the 0.2% growth in the fourth quarter, with biomedical output recovering from a slump.
"The rest of the manufacturing clusters also enjoyed a better performance in the first quarter, with the exception of the transport engineering and precision engineering clusters, where growth moderated," the government said.
Activity in the construction sector gained pace to double-digit levels but is expected to moderate from the strong fourth quarter.
The construction sector expanded by 14.6%, compared with 24.3% growth in the fourth quarter.
Growth in service industries continued to expand, led by financial services, but may have slightly moderated to 7.6% from 7.7% in the fourth quarter based on MTI's estimates.
The strong GDP numbers provided the Monetary Authority of Singapore (MAS), the city-state's de facto central bank, the leeway to tighten its foreign exchange policy to tackle soaring inflation.
The consumer price index (CPI) in Singapore was up 6.6% in January, a 25-year high, with just a slight moderation to 6.5% in February.
The MAS said on Thursday it is re-centering its policy band at the current strong level of the Singapore dollar nominal effective exchange rate (NEER).
"They [MAS] seem like they are pretty confident that things are holding up nicely," said Cohen.
The MAS is still predicting GDP growth this year of between 4% and 6%, although growth is expected to ease in the next few quarters, while inflation is expected to be at the upper end of the central bank's forecast range of 4.5% to 5.5%.
"The [economic] outlook is still dependent on the global picture, which remains uncertain. Everyone is still nervous about the U.S. economy and how much it will drag down global demand," said Cohen.