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SINGAPORE: Private sector economists now expect the Singapore economy to shrink by 3.6 per cent this year, according to the latest survey by the Monetary Authority of Singapore (MAS).
The forecast is much better than the 6.5 per cent contraction they were expecting just three months ago and also ahead of the government's prediction of a four to six per cent contraction for the full year.
Sparks are flying in the manufacturing sector as tech and biomedical manufacturing output starts to show signs of improvement. And this has led many private sector economists to become more optimistic about the Singapore economy.
David Cohen, director of Asian Economic Forecasting, Action Economics, said: "It's consistent with the data we have seen over the last few months. After all, the second quarter GDP, the number from that previous survey turned out much better then anyone had imagined a few months ago.
"It's on par with the numbers around the region, with many of the Asian economies swinging back into positive growth in the second quarter, quarter-on-quarter, after having suffered a severe contraction in the first quarter. A lot of this has come as global export demand has bottomed out after collapsing at the end of last year."
Sector-wise, the survey also showed that private sector economists are expecting the key manufacturing sector to pick up. They are now calling for a much milder contraction of 7.1 per cent compared to 14 per cent in June.
But they have downgraded their view for wholesale and retail trade as well as hotels and restaurants. Analysts said these two sectors are still nursing wounds from the slowdown in travel and spending.
The labour market too continues to lag and this is expected to put growth at a more moderate pace for the rest of the year.
Irvin Seah, economist, DBS Bank, said: "So there are some expectations of some downside risk coming from the labour market globally, but the statistics are showing things have improved significantly compared to a few months back.
"I think now we are probably going to see a more subdued rate of recovery - certainly not as high as what we see in the second quarter, that is likely to be one off. Going forward, trajectory for growth is more likely to be gradual."
Going forward, things are expected to continue to pick up. The survey's respondents expect GDP in Singapore to grow by 4.5 per cent in 2010, higher than the 4.2 per cent reported in the June survey. - CNA/vm
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