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Thread: Govt raises GDP forecast

  1. #1
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    Default Govt raises GDP forecast

    http://www.straitstimes.com/Prime%2B...ry_403154.html

    July 15, 2009 Wednesday

    Govt raises GDP forecast

    Economy now expected to contract by 4% to 6%, but outlook for rest of year remains subdued, MTI cautions

    By Alvin Foo


    SINGAPORE roared out of recession with growth of 20.4 per cent in the second quarter over the previous quarter, marking the first expansion in a year and prompting the Government to raise its 2009 growth forecast.

    The flash estimates, which are based mainly on April and May numbers, showed growth in the construction sector and a sharp improvement in manufacturing, thanks to the drugs cluster.

    'The Singapore economy is back, and back with a vengeance,' said HSBC economist Robert Prior-Wandesforde, who expects other regional economies to produce similar rallies.

    The Government also revised its 2009 growth forecast upwards after three downgrades.

    The Ministry of Trade and Industry (MTI) now expects the economy to contract by 4 to 6 per cent instead of the 6 to 9 per cent decline predicted in April, thanks to the 'less severe contraction' in the first half of the year.

    However, it is sticking to its outlook for the rest of the year - a weak recovery that will be at risk from more bad news.

    The flash estimates were clearly the headline grabber yesterday.

    They showed that the economy surged 20.4 per cent compared with the first quarter - a far better figure than the experts had tipped and the first positive quarter after four consecutive quarters of contraction.

    However, the economy was still down 3.7 per cent compared with the same period last year, its third straight year-on-year period of slump but again better then market expectations.

    The brighter figures also mean Singapore is the first Asian economy out of a technical recession, defined as at least two consecutive quarters of contraction.

    Yesterday's avalanche of numbers also sparked more optimism of a second quarter recovery across Asia, as Singapore is the first key economy in the region to report second quarter growth numbers.

    A key figure was that the economy shrank by 12.7 per cent in the first quarter compared with the last three months of last year. That is less than the 14.6 per cent decline estimated in May and the 19.7 per cent dive tipped in April.

    In the second quarter, manufacturing fell 1.5 per cent from a year ago compared with a 24.3 per cent slump in the first quarter. The better performance was due to a surge in the volatile biomedical manufacturing sector and an improvement in electronics from inventory restocking.

    Construction grew 18.3 per cent in the second quarter while services declined 5.1 per cent.

    The Maritime and Port Authority of Singapore underlined the positive trend, with figures showing that while port terminals handled 17 per cent fewer containers last month from a year ago, traffic was steady from May.

    But the MTI cautioned that its outlook for the rest of the year is subdued, due to 'continued weaknesses in the global economy'. It noted: 'At this juncture, there is no evidence yet of a decisive improvement in final demand.'

    Although several economists have upgraded growth forecasts due to the second quarter data, many warn that the local economy is still not out of the woods.

    CIMB-GK economist Song Seng Wun said: 'The bulk of the improvement came from the spike in drug output and exports. Whether the cluster can sustain its strength in the second half is questionable. Outside of biomedical, we are only seeing modest improvements in the demand for Singapore's exports.'

    He calculated that if the biomedical cluster were taken out, the overall quarter-on-quarter growth estimate for the second quarter would be 5 per cent instead of 20.4 per cent.

    OCBC economist Selena Ling noted: 'The recovery process remains fraught with risks... there's little clarity as regards a clear turnaround in final demand from the developed economies.'

    UOB economist Chow Penn Nee said: 'The re-stocking process benefiting the manufacturing sector might not be sustainable...as final demand from key export countries like the US and Europe is still weak.'

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  2. #2
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    Default Better economic outlook powers stock rebound

    http://www.straitstimes.com/Money/St...ry_403250.html

    July 15, 2009

    BULLS AND BEARS

    Better economic outlook powers stock rebound

    STI surges on news that Singapore may be emerging from recession

    By Goh Eng Yeow, Markets Correspondent


    STOCKS surged strongly yesterday on news that Singapore might finally be emerging from the depths of its worst recession in decades.

    Values were boosted by news that second-quarter flash estimates showed Singapore's gross domestic product had grown 20.4 per cent from the first quarter. Biggest gainers were bank and property counters, which were both badly bruised by Monday's sell-off.

    The Government now expects the economy to contract by 4 per cent to 6 per cent for the full year, rather than the 6 per cent to 9 per cent contraction it previously predicted.

    The improved outlook tempted investors back to the market with the benchmark Straits Times Index gaining 43.91 points, or 1.9 per cent, to 2,310.55 - recouping the losses sustained on Monday.

    CIMB-GK economist Song Seng Wun, in a note to clients, said Singapore's spectacular second-quarter rebound was powered by a recovery in manufacturing, and particularly in biomedical output.

    'With the fear factor diminishing, Asian exporters are starting to benefit from global inventory restocking and this will have a positive impact on manufacturing production and non-oil exports in the coming months,' he added.

    Despite the second-quarter jump in activity, he warned that Singapore might still be a year or so away from a broad- based recovery, when overall labour market conditions improve and consumers in the United States and Europe start to spend again.

    Given the more positive outlook, bank stocks were eagerly snapped up by investors who were influenced by Wall Street, which gained a hefty 185 points after influential banking analyst Meredith Whitney upgraded her views on investment bank Goldman Sachs and said Bank of America could provide value for investors.

    DBS Group Holdings rose 32 cents to $11.74, United Overseas Bank gained 36 cents to $14.78, while OCBC Bank was up 14 cents at $6.80.

    Property counters made a comeback on hopes of a brisk pickup in the residential market. City Developments rose 22 cents to $8.22, while CapitaLand gained eight cents to $3.39, and Keppel Land was up five cents to $2.09.

    On the broad market, however, trading was relatively muted, despite gains made by penny and China stocks. Market volume fell below one billion shares to 915.27 million shares worth $924.69 million, with 338 gainers outpacing 120 losers.

    Going forward, Merrill Lynch chief global strategist Michael Hartnett remains hopeful of a summer rally, given the liquidity still available in the market.

    Institutional players, for example, were surprised to learn that cash still made up more than 20 per cent of retail investors' portfolios. He believed the biggest upward surprise to the second half could be a rally in US consumer spending and global lenders outperforming market expectations.

    And, while some investors are still sceptical about the quality of the economic expansion in China, he felt there was 'still room for China growth to surprise over the medium term'.

    Some traders noted that Wall Street jubilation might be premature, considering that another large US lender, CIT Group, was in financial difficulties.

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