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Economists positive about Singapore's outlook despite narrowed growth forecast

Prime Minister Lee Hsien Loong announced in his National Day Message that the growth forecast for the full year has been narrowed to between 2.5 and 3.5 per cent, from 2 to 4 per cent previously, but economists say the risk of a technical recession this year remains low.

SINGAPORE: Details of Singapore's first half and second quarter economic growth numbers will be released next week. But Prime Minister Lee Hsien Loong gave one headline number in his National Day Message - saying that first half GDP growth came in at 3.5 per cent. That is up from 2 per cent in the same period a year ago.

And based on the revised growth forecast of 2.5 to 3.5 per cent for the full year, economists say this implies the economy will grow between 1.5 and 3.5 per cent in the second half.

"Going forward, stronger base effects in the second half of the year do imply that if we are to sustain the 3.5 per cent (growth) seen in the first half, the quarter-to-quarter (growth) will have to pick up. So this is why we have seen the growth target actually being narrowed," explained Mr Jeff Ng, a Standard Chartered Bank economist.

And given that GDP growth was 4.9 per cent in the first quarter, economists say the second quarter growth likely came in at 2.1 per cent on-year. On a quarter-on-quarter basis, that's a contraction of up to 0.8 per cent. Still, analysts say the risk of a technical recession remains low.

"Technical recession - the definition will be two consecutive quarters of negative growth. For the second quarter, we may see a slight negative growth in terms of quarter on quarter (growth); however, in the third quarter, I am not seeing the possibility of negative growth. So I don't think that in the whole of 2014, we may see any technical recession risk at all," said United Overseas Bank economist Francis Tan.

However analysts say the next half year will be challenging, with rising geopolitical tensions in pockets of the world, and health scares like the Ebola crisis. And on top of that, Singapore has to deal with its own restructuring problems, as it tries to bring achieve higher productivity for its economy.