Economy surprises with robust 7.2% Q1 growth
April 11, 2008
But MAS says growth is likely to ease in next few quarters as global
outlook dims
Inflationary
concerns outweigh downside growth risks - for now anyway - as the economy
rebounded strongly in the first quarter. But GDP growth is expected
to ease in the months ahead.
The
7.2 per cent flash estimate of Q1 growth - against sub-6 per cent consensus
forecasts, and up from the preceding Q4’s 5.4 per cent pace - mostly
surprised on the upside. In annualised, adjusted terms, the economy
- far from slipping into a technical recession, after a Q4 contraction
- grew almost 17 per cent in Q1, according to the advance figures based
only on January and February data.
Notably,
the manufacturing sector roared back after the previous quarter’s flat
performance. According to the Ministry of Trade and Industry, the sector’s
13.2 per cent recovery was due to a surge in the biomedical cluster
and a better showing by mainly the electronics and chemicals industries.
Growth
was fairly broad-based across the economy, with the services sector
maintaining pace at 7.6 per cent, led by the financial services. Construction
growth slowed, but to a still robust 14.6 per cent.
The
Monetary Authority of Singapore - which unexpectedly tightened monetary
policy yesterday - had rather a lot more to say about the growth outlook.
Singapore’s
economic growth is likely to ease in the next few quarters, says the
central bank in its monetary policy statement.
Global
growth prospects have worsened significantly of late, but regional resilience
should continue to support Singapore’s growth, MAS says.
And
while maintaining the official forecast of 4-6 per cent growth for 2008,
it adds: ‘A more severe global downturn cannot be ruled out if there
is a further escalation of the financial crisis in the US. If this occurs,
Singapore’s growth will be adversely affected.’
Meanwhile,
global inflationary pressures remain high, and Singapore’s consumer
price inflation is expected to remain elevated in the first half of
2008, MAS says.
It
now projects Singapore’s 2008 inflation rate to come in at the upper
half of the 4.5-5.5 per cent forecast range.
‘Against
this backdrop of continuing external and domestic cost pressures, an
upward shift of the policy band at this point will help to moderate
inflation going forward,’ it says.
While
surprised by the Q1 GDP figures, economists are a little divided about
how much the economy will be hit by the US recession that will likely
show its hand in Asia later in the year.
Standard
Chartered Bank’s forecasts for Singapore see GDP growth slowing sharply
to just 2.8 per cent by Q4, averaging 4.5 per cent for the year.
On
the other hand, HSBC economist Robert Prior-Wandesforde maintains that
‘domestic fundamentals remain highly supportive of growth’ and is sticking
to his forecast of 6 per cent growth for 2008. He also expects no reversal
of the monetary tightening at the next review in October - and sees
the inflation rate easing to about 3 per cent in Q1 2009.
For
at least one economist, though, the Q1 7.2 per cent GDP growth is simply
‘not high enough’.
Given
the robust flash estimates for manufacturing, services and construction,
the numbers just do not ‘add up’, says Daiwa Institute of Research’s
P K Basu, who had forecast 8.4 per cent GDP growth for the quarter.
Could
there have been a “computation error” somewhere, he wondered. Asked
about this, an MTI officer ran through the data, and found nothing amiss.
The
full details of Q1 economic performance, including March figures, will
be released next month.
Source
: Business Times - 11 Apr 2008
