Singapore's MTI forecasts economic growth of 3-5% in 2010
By Ng Baoying, Channel NewsAsia | Posted: 20 November 2009 0135 hrs

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SINGAPORE: The Ministry of Trade and Industry (MTI) said that the recession in Singapore is over, on the back of two consecutive quarters of economic growth.

GDP was up 14.2 per cent in the three months ending September, following a 21.7 per cent increase in the second quarter.

On a year-on-year basis, Singapore's economy grew by 0.6 per cent in the third quarter.

The Singapore government said earlier that it expects the economy to contract between 2 and 2.5 per cent this year. But going forward, it appears to expect skies to brighten quickly.

MTI projected that Singapore's economy will grow by 3 to 5 per cent in 2010, and most analysts agree with this.

Leong Wai Ho, associate director, regional economist, Barclays Capital said: "Base effects will be one. The first few quarters of this year registered large declines in growth.

"Even if the economy doesn't grow and remains at the GDP level in the fourth quarter, for the next four quarters in 2010, on a year-on-year basis, you will still get 3.8 per cent growth."

The opening of the integrated resorts is expected to boost tourism and retail sales, and this along with a good pipeline of growth in the biomedical sector should keep things rosy.

Mr Leong added: "A large part of this will come from additions to capacity in the economy, various parts of the economy. Obviously you have the IRs which will boost retail sales, tourism traffic, tourism arrivals and spending.

"Another factor is the addition to capacity in the manufacturing sector. We have got a S$3 billion petrochemicals complex opening up soon and we will also probably realise some investments in biologics, biomedicals, medtech that will come on stream and be ramped up sometime in the second quarter next year."

According to numbers released on Thursday, growth in the third quarter was led by manufacturing. The sector expanded by 26.6 per cent on a quarter-on-quarter basis.

Positive numbers in the construction, and services sector also supported growth.

Leon Perera, group managing director, Spire Research and Consultancy said: "The third quarter GDP numbers were in line with expectations, broadly speaking. The picture is very much consistent with that of a global economy returning to weak growth rather than strong and vigorous growth, nowhere near the levels of growth pre-crisis."

Barclays expects a 6.5 per cent growth in 2010, while Spire Research thinks the economy will expand between 4 and 6 per cent.

The government marked up its forecast for inflation in 2010 to between 2.5 and 3.5 per cent from 1 to 2 per cent earlier, due to an upward revision in annual values of public housing.

However, analysts noted that risks of food and energy inflation exist for Asian economies going forward.

For example, Barclays marked up its inflation forecast from 1.5 per cent to 4 per cent in 2010, and suggested that the central bank could tighten monetary policy in April 2010.

- CNA/sc