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SINGAPORE - Singapore roared back from recession in the first quarter, the government said on Wednesday, as it sharply raised its economic growth forecast and tightened monetary policy to check inflation.
Preliminary estimates showed first quarter gross domestic product (GDP) expanded 13.1 per cent from a year ago and 32.1 per cent on a quarter-on-quarter seasonally adjusted basis, the Ministry of Trade and Industry said.
The strong results prompted the ministry to upgrade its growth forecast to 7.0-9.0 per cent this year from the previous 4.5-6.5 per cent.
Trade-reliant Singapore's revised growth target comes amid signs that the global economy is continuing to recover from the financial and economic crisis that struck in late 2008 and extended well over into last year.
Singapore's economy, the first in Asia to slip into recession, contracted 2.0 per cent last year as the crisis hammered demand for its exports.
Banking giant DBS said the 32.1 per cent quarter-on-quarter expansion "will go down in the history book as the strongest quarterly growth ever recorded" for the affluent city-state.
The surge also marked a strong turnaround from the same period last year, when GDP shrank 9.4 per cent annually and 7.1 per cent from the previous three months.
Singapore's Straits Times Index closed 1.62 per cent higher at 3,019.74 on Wednesday as the stock market cheered the news.
"All cylinders were firing with all key sectors registering very strong growth," DBS Bank said in a commentary. It also described the expansion as a "supernormal growth".
Manufacturing led the way with a 30 per cent year-on-year expansion in the first quarter as external demand for information-technology-related products improved.
Construction grew 11.3 per cent annually and services-producing industries surged 8.4 per cent, the trade ministry said.
"The outlook for the global economy has shown further signs of improvement," the ministry said.
"While downside risks remain, such as a sovereign debt crisis in Europe or a slowdown due to withdrawal of fiscal measures, these have been outweighed by stronger signs that global economic conditions are improving."
The Monetary Authority of Singapore (MAS) on Wednesday announced it was adopting a tighter monetary policy stance to tame inflation as the economic recovery gains traction.
Singapore's monetary policy is conducted via the local currency, which is traded against a basket of currencies of its major trading partners within an undisclosed band known as the nominal effective exchange rate.
MAS, the country's central bank, revalued upwards its targeted trading band for the Singapore dollar and said it would now allow a "modest and gradual appreciation" of its currency, shifting from "zero appreciation".
Analysts described the MAS' policy move as "aggressive", but the central bank said it was necessary to curb inflationary pressures.
With the strong first-quarter growth, Singapore "has now fully recovered the output lost during the recession, and economic activity in a broad range of industries has exceeded its pre-crisis peak", MAS said.
Along with economic growth, however, "inflationary pressures are likely to pick up, driven by rising global commodity prices as well as some domestic cost factors", it added.
Singapore uses the local currency, rather than interest rates, to conduct monetary policy because of the economy's huge reliance on external trade. - AFP/vm
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