Singapore economy grows annualised 7.6% in Q4 of 2006
By Tung Shing Yi, Channel NewsAsia | Posted: 03 January 2007 1915 hrs

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SINGAPORE: The Singapore economy expanded at its fastest rate in the fourth quarter of 2006, based on advanced estimates.

According to data from the Trade and Industry Ministry, the economy grew at an annualised rate of 7.6 percent in Q4 compared with the previous three months, which is higher than economists' expectations.

Compared with the year before, the economy grew 5.9 percent in the fourth quarter.

This takes Singapore's full year growth to 7.7 percent for 2006, as indicated by Prime Minister Lee Hsien Loong in his New Year message last Sunday.

On a quarter-to-quarter seasonally adjusted basis, GDP for the fourth quarter of 2006 grew by 7.6 percent, following a 5.6 percent gain in the preceding quarter.

That far outpaces estimates by economists, who expected fourth quarter growth to come in at around 4.1 percent.

Manufacturing is estimated to have grown at a slower pace of 7.3 percent, due partly to a weaker output in the electronics and chemicals sector.

But double-digit growth was seen in both the biomedical manufacturing and transport engineering clusters.

Selena Ling, Treasury Economist, OCBC Bank, says: "We are calling for the manufacturing momentum to slow this year, compared to last year. We think that double-digit growth is probably not sustainable, given that the global electronics cycle is turning down. We do think that this indicates some weakness, at least in the first half of this year."

The construction sector continued to recover in the fourth quarter.

The sector is estimated to have grown by 2.4 percent, after a 2.6 percent gain in the third quarter.

Expansion in the services industry moderated to 6 percent in the fourth quarter, due mainly to slower growth in the wholesale and retail trade sector.

Financial services and hotels and restaurants, however, saw a faster pace of growth.

For 2006 as a whole, manufacturing and services expanded 11.4 percent and 6.9 percent respectively, while the construction sector grew 1.1 percent - the first positive growth for the sector since 2000.

The consensus is that an economic slowdown is expected in 2007.

"We're looking for 5 percent growth for the full year of this year. This is within the government's 4-6 percent growth forecast. We do think growth will be relatively broad-based. Although manufacturing is going to slow, it's going to slow quite modestly," says Ms Ling.

"In terms of services, we think there is going to be support coming from the tourism-related services. And financial services should do well, given that bank credit growth is expanding. Private banking and wealth management industry should do quite well as well."

The government expects the Singapore economy to grow by 4 to 6 percent this year.

Most economists expect GDP growth to come in at around 5 percent for 2007. - CNA/so