Singapore Upgrades 2010 Growth Forecasts

Singapore's Ministry of Trade and Industry announced today that it expects the island nation's economy to grow at 4.5% to 6.5% this year, following a contraction of 2.0% in 2009.


Government data shows that real gross domestic product (GDP) expanded by 4.0% on a year-on-year basis in the fourth quarter of 2009, after growing by 0.6% in the third quarter of 2009. On a seasonally adjusted quarter-on-quarter annualised basis, Singapore’s GDP contracted by 2.8% in the fourth quarter of 2009.


The services sector grew by 6.6% on a seasonally adjusted quarter-on-quarter annualised basis in the fourth quarter, compared to 8.2% growth in the third quarter. The trade- and tourism-related sectors (such as wholesale and retail; transport and storage; and hotels and restaurants) posted the strongest gains compared to the previous quarter. The financial sector, however, contracted from the previous quarter, in part due to declines in the fund management and stockbroking segments.


The ministry also reveals the manufacturing sector contracted by 29.0% on a seasonally-adjusted quarter-on-quarter annualised basis in the fourth quarter, a reversal from the 25.6% expansion in the third quarter. This decline was mainly due to a contraction in the output of the biomedical manufacturing and transport engineering clusters. Growth in the electronics and chemicals clusters strengthened on the back of continued recovery in global trade.


Meanwhile, the construction sector picked up in the fourth quarter, expanding by 16.4% on a seasonally-adjusted quarter-on-quarter annualised basis in the fourth quarter compared to 3.8% in the third quarter.


Overall Performance in 2009


Overall, the Singapore economy contracted by 2.0% in 2009, in line with MTI’s forecast of a contraction of 2.0% to 2.5%.


The services producing industries contracted by 2.2% in 2009, following an expansion of 5.4% in 2008. This was due to a contraction of all major services sectors, with the exception of the information & communications sector, the business services sector and the other services sector.


The manufacturing sector contracted by 4.1%, compared to a contraction of 4.2% in 2008. With the exception of the biomedical manufacturing sector, all manufacturing clusters (electronics, chemicals, transport engineering, precision engineering and general manufacturing) contracted in 2009. The construction sector expanded by 16.0%, following growth of 20.8% in 2008.


Economic Outlook for 2010


The ministry expects the Singapore economy to grow by 4.5% to 6.5% this year. This upgrade from the earlier 3.0% to 5.0% forecast largely reflects increased strength in the near term growth momentum.


For 2010, the inflation forecast has been revised from 2.5% to 3.5% to 2.0% to 3.0%. This revision is attributable to the rebasing of the consumer price index (CPI) to 2009, which resulted in changes to the weights of goods and services in the CPI, as well as to methodological improvements. The Monetary Authority of Singapore’s underlying inflation forecast, which excludes the cost of accommodation and private road transport, remains at 1.0% to 2.0%.

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