Singapore's GDP rockets 39% as Asian trade soars

Singapore's GDP rockets 39% as Asian trade soars
May 20, 2010 - 12:26PM

Singapore's economy expanded at a faster pace than initially estimated last quarter as rising global demand boosted manufacturing and the opening of the island's first casino spurred tourism.

Gross domestic product grew an annualised 38.6 per cent from the previous three months in the first quarter, compared with an April estimate of 32.1 per cent, the trade ministry said in a statement today. That was more than the 33.4 per cent increase economists were expecting.

From a year ago, the economy expanded by 15.5 per cent, the highest quarterly growth on record. Singapore's economy shrank by 1.3 per cent last year, revised data shows after a previously reported contraction of 2 per cent.

Officials said the strong rebound from its worst-ever recession last year will be helped by a broad-based recovery in the United States and buoyant growth in large Asian economies such as China.

"The data from Singapore and around the region underscore that so far, the rebound in exports and production has been much better than what people have been expecting," said David Cohen of Action Economics.

Mr Cohen predicts the economy could grow up to 10 per cent this year, above the government's forecast of 7-9 per cent and notwithstanding the risks from the debt troubles in Europe.

Bubble risks

However, the government warned of risks from asset price bubbles in Asia and the fallout from Europe's debt crisis.

If asset prices correct too sharply in China, it could have "negative spillover'' effects on regional economies, Ravi Menon, permanent secretary at the trade ministry, told reporters in Singapore today.

"Should investor sentiments wane or if more monetary tightening measures are introduced, sharp asset price corrections could follow,'' the ministry said. "If these risks materialise, they could affect the global recovery and negatively impact Singapore.''

Singapore private home prices rose 5.6 per cent in the first quarter from the last three months of 2009 despite government policies such as higher down payment requirements for mortgages.

Ong Chong Tee, deputy managing director at the Monetary Authority of Singapore, the city-state's central bank, indicated the government will use administrative rather than broad measures to curb runaway property prices.

"It is much better not to use monetary policy, which is a blunt instrument, but to use much more targeted, preventive, administrative or even fiscal measures to address this," he said.

Japan, Malaysia

Growth is also accelerating in other parts of Asia. Japan said today its economy expanded at the fastest pace in three quarters in the period ended March 31 as an export-led recovery spreads to consumer and business spending. Neighboring Malaysia last week reported a first-quarter expansion that was the quickest in a decade.

Singapore's non-oil domestic exports will probably gain between 15 per cent and 17 per cent in 2010, from a previous projection of as much as 12 per cent, the trade promotion agency said today.

Singapore's government expects the economy to grow as much as 9 per cent this year.

The Monetary Authority of Singapore, which uses the currency instead of interest rates to conduct monetary policy, said April 14 it will "re-centre the exchange rate policy band at the prevailing level'' of the Singapore dollar, shifting to a stronger range for the currency to trade in. The central bank guides the Singapore dollar against a basket of currencies within an undisclosed band.

The Singapore dollar, which rose as much as 1.2 per cent on the day the new currency stance was announced, has since weakened amid the European debt crisis. It traded at $US1.3977 against its US counterpart in early trade, falling 2.1 per cent this month.

Manufacturing and tourism

Manufacturing, which accounts for about a quarter of Singapore's economy, climbed 32.9 per cent from a year earlier last quarter, after gaining 2.2 per cent in the three months through December. That compares with the April estimate of 30 per cent.

Singapore's visitor arrivals are surging as resorts run by Las Vegas Sands Corp. and Genting Singapore Plc attract tourists to their roulette tables, shops and hotels. The Singapore Tourism Board expects to lure as many as 12.5 million visitors this year.

The island's services industry grew 10.9 per cent last quarter from a year earlier, after climbing a revised 3.7 per cent in the previous three months. The construction industry gained 13.7 per cent, compared with a revised 11.5 per cent increase in the fourth quarter.

Bloomberg News, Reuters