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SINGAPORE: Economists are generally optimistic that Singapore has weathered the worst of the global recession. But they warned on Monday that the external environment would still be a major factor for the country's recovery.
They were responding to comments made by Singapore's Prime Minister Lee Hsien Loong at the National Day Rally on Sunday.
New and emerging industries are expected to give the Singapore economy a boost as it emerges from the current crisis. Homegrown furniture, interactive and digital media sectors are making inroads into the global market and attracting international players to the country.
Even though these industries – highlighted by Mr Lee in his address – may not contribute much to the economy now, observers believe this could change with the right nurturing and guidance.
Robert Prior-Wandesforde, senior Asian economist, HSBC, said: "We've seen the recovery begin in the second quarter. In Q2, it was pharmaceutical-driven, but since then, we've had so much better export numbers from their low in January.
"We saw last week very good retail sales as well. These are the early days, but it does seem as if the economy is broadening out and I expect a sustained recovery into 2010."
Experts said as sentiment continues to improve, Singaporeans will start spending again, boosting retail sales. They also noted that the financial sector, too, has started to recover and will remain a key driver for the economy, along with the services industry.
Tai Hui, regional head of research, Standard Chartered Bank, said: "I think the services sector is going to play a crucial role. We spend a lot of time talking about manufacturing, which has been the more volatile sector. But I think the trade services are going to be very much the bread and butter of Singapore economy.
"Financial services have been very much battered back in the fourth quarter of last year and first quarter this year, but they have come back in the second quarter. I think financial services that introduce investment into Asia are going to be a very interesting area of growth for the next two to three years."
While Christmas may still be a few months away, orders are already starting to trickle in for the manufacturing sector. Market-watchers, however, said the outlook remains cautious and is dependent on external conditions and global demand.
Renny Yeo, president of the Singapore Manufacturers' Federation, said: "In the manufacturing sector, there is usually a time lapse of orders versus actual demand. For Christmas orders, the production output will begin in Q3. While we can see pockets of slight improvements in orders for Q3, this observation is not broad based nor is it a huge increment.
"Our manufacturers also shared that they are uncertain if more significant increments can be sustained in the forthcoming quarters. Overall, the visibility for manufacturing outlook for Q4 and beyond still remains cautious, depending on the recovery rate for external conditions and global demand. Most of our members are, however, confident that we have already hit bottom."
- CNA/so
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