Singapore has joined South Korea in upgrading its economic outlook after a better than expected second quarter performance.
The Singapore government yesterday said the economy rebounded 20.4% in the second quarter, from the sharp first quarter fall.
The Trade and Industry Ministry said in a statement that the economy will shrink 3.7% from the second quarter of last year.
"Compared to the same period last year, real GDP is expected to contract by 3.7 per cent, compared to the 9.6 per cent contraction registered in the first quarter of 2009.
"On a seasonally-adjusted annualised basis, real GDP rose by 20.4 per cent compared to the first quarter, an improvement from the 12.7 per cent contraction experienced in the previous quarter.”
The ministry said it now expects the economy to shrink between 4% and 6% this year, compared to a previous forecast for the economy to contract by 6% to 9%.
"The revised 2009 forecast reflects the less severe contraction in the first half of the year, while the underlying economic conditions remain weak," the ministry said.
"Since the last forecast in April/May, there has been a significant upward revision to the first quarter 2009 results.
"On a seasonally-adjusted annualised basis, real GDP contracted by 12.7 per cent compared to the last quarter of 2008, less than the contraction of 14.6 per cent estimated in May and the contraction of 19.7 per cent estimated in April.
"This implies that the economy contracted less severely in the first quarter of 2009 than earlier estimated. On a year-on-year basis, the economy contracted by 9.6 per cent," the Ministry said in its statement.
The Singaporean economy had contracted over the previous four quarters, with an annualised, seasonally adjusted 16.4% drop in the three months to December, marking its deepest recession since splitting from Malaysia in 1965.
A surge in pharmaceutical production helped boost growth in the second quarter.
"A sizable part of Singapore’s manufacturing uptick came from a spike in biomedical manufacturing output and electronics inventory restocking, both of which may not be sustained," the ministry warned.
If that was to happen, growth over the remainder of the year will be weaker.
Singapore’s government raised its economic forecast for 2009 as the economy emerged from the deepest recession since its 1965 independence amid a rebound in manufacturing and exports.
"Manufacturing is estimated to have contracted by 1.5 per cent, compared to a 24.3 per cent contraction in the first quarter.
"This reflects chiefly a spike in output registered by the volatile biomedical manufacturing cluster, and an improvement in the electronics cluster due to inventory restocking.
"Overall, the services producing industries remained weak; contracting by 5.1 per cent in the second quarter, similar to the first quarter.
"The majority of the services producing industries continued to see declines in year-on-year terms. The wholesale and retail trade sector continued to contract, albeit at a slower pace with smaller declines in non-oil domestic exports (NODX) and non-oil re-exports (NORX).
"Financial services also saw a less severe contraction as general market sentiments improved. On the other hand, the hotels and restaurants sector was weighed down by the slump in tourist arrivals.
"Notwithstanding the improved performance in the second quarter, the outlook for the rest of the year remains largely unchanged – of a weak recovery susceptible to downside risks.
"For instance, rising unemployment and reduced household spending in the advanced economies such as the US and the Eurozone reflect continued weaknesses in the global economy. Housing markets in many leading economies have yet to bottom out, while financial institutions are still in the process of deleveraging.
"At this juncture, there is no evidence yet of a decisive improvement in final demand."
"The revised 2009 forecast of -6.0 to -4.0 per cent reflects the less severe contraction in the first half of the year, while the underlying economic conditions remain weak," the Ministry added.
Elsewhere; as we reported Monday South Korea is also doing better than thought, while India’s industrial production increased at the fastest rate in eight months in May and Malaysia’s output fell by the smallest amount in six months.
The Japanese government said on Monday the economy is “picking up,” and upgraded its view of exports, business sentiment and consumer spending. But it’s in an election campaign; so much of the comment will be electioneering hype.
As we reported Monday, the Bank of Korea sees the South Korean economy recording its fastest quarterly growth for five and a half years in the second quarter, which helped underwrite the upgrades.
The country’s central bank estimated second quarter growth at a rapid 2.3% on the March quarter when the economy grew by just 0.1%. It was down 2.5% from last year.
If confirmed when more accurate figures are released in the next month, it would be the fastest quarterly growth since the fourth quarter of 2003.
As a result, the Bank of Korea has lifted its 2009 growth forecast to a contraction of 1.6%, up from the April forecast of 2.4%.
The 2010 forecast was lifted to 3.6% (3.5% previously).
