Clear signal of recovery ahead
(Maybe in Singapore only or Singapore happens to be first.....)
MTI stays cautious despite 3.2% growth in second quarter, but expects full-year figure at upper end of its 2-4% forecast
By Narendra Aggarwal
ECONOMICS CORRESPONDENT
SINGAPORE'S economy has
bounced back strongly, with a healthy 3.2 per cent growth for the April-June quarter, after a bleak 12 months of shrinkage - yanking it, by textbook definition, out of the country's worst recession since independence.
Ministry of
Trade and Industry
Releasing the advance figures yesterday, the Ministry of Trade and Industry (MTI) said it expects full-year growth to be at the upper end of its 2 per cent to 4 per cent forecast.
Still, pointing to the 'weak' employment position, the MTI is not yet ready to declare the recession over, and is looking for a broader recovery than only that of gross domestic product (GDP), the main growth measure.
Said an MTI spokesman: 'We cannot look just at GDP to say whether the recession is over. A range of indicators, like industrial production and employment, has to be examined in determining the start or end of a recession.
'This will require examining at least six months' of data beyond the trough before we can declare the recession over.
'What we can say now is that the economy is recovering, based on the improvement of some indicators. But employment is still weak.'
While the unemployment rate is about 4.5 per cent, it is feared that it could rise to 5.5 per cent later this year, before getting better.
The MTI backed its views on the onset and duration of the recession by pointing to the National Bureau of Economic Research in the United States, which employs a similar practice.
While a bounce back from the recession was widely expected, the crisp pace of recovery came as a pleasant surprise to analysts.
Calculated on a quarter-on-quarter basis, the economy grew by a sparkling 10.3 per cent in the second quarter, exceeding the 8.4 per cent growth in the first quarter of this year, when the economy shrank a revised 1.5 per cent in more conventional year-on-year terms.
Mr Paul Schymyck, regional economist at research house IDEAglobal, said that this strong underlying growth momentum was similar to that seen in early 2000, which was triggered by the global electronics boom. The local economy chalked up a brilliant 10.3 per cent growth that year.
'This time round, we are seeing very strong contributions from the emerging bio-medical sector. The Government's strategy of diversifying manufacturing by reducing reliance on electronics is bearing fruit,' he said.
But the MTI cautioned that the second-quarter improvement 'can be attributed mainly to an exceptional surge in activity in the chemicals cluster, whose quarterly performances are typically volatile'.
'This resulted in a strong, but narrowly-based, rebound in the manufacturing sector,' it added.
As a result of the better-than-expected manufacturing performance, goods-producing industries are estimated to have expanded by 7.5 per cent.
'Most sectors registered better performance, in line with the improvement in economic conditions,' it said, but did not provide a sectoral breakdown.
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