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Singapore's economy is bouncing back at last

Singapore is on track to be one of Asia's best economic performers this year after hacking its way out of a severe recession, a global slowdown and SARS, economists said.

Preliminary data showing 7.3 percent annual growth in GDP and robust export numbers for last month indicate the economic recovery has very solid foundations, they said.

With GDP projected to grow by as much as 7.5 percent, Singapore looks set to have one of the region's highest growth rates outside of Asian giants India and China, whose economies are sizzling-hot and approaching the 10 percent mark.

"I will expect Singapore to be among the top performers this year in terms of GDP, the other two countries being Malaysia and Thailand," said regional economist Song Seng Wun of brokerage G.K. Goh.

Song has possibly the highest forecast for Singapore's GDP this year at 7.5 percent, with others projecting the economy to expand between 6 percent and 7 percent.

Malaysia and Thailand are targeting GDP growth of 7 percent or higher, while Hong Kong expects between 6 percent and 7 percent.

ASEAN finance ministers who met in Singapore earlier this month said the region is poised to grow by up to 5.9 percent this year, the highest rate since the 1997 to 1998 Asian financial crisis.

For Singapore, it has been a hard climb.The economy crashed from nearly 10 percent growth in 2000 to shrink by 2.4 percent in 2001, when a US-led global slowdown precipitated the city-state's worst-ever recession.

A nascent recovery in 2002 was nipped in the bud by the war against Iraq and the SARS crisis, which killed 33 people out of 238 infections here in the first half of last year. GDP expanded a mere 1.1 percent that year.

EXPORTS RISE STEEPLY

In the latest economic data released on Friday, non-oil domestic exports (NODX) rose 17.1 percent last month from the previous year on a continued strong showing by electronics and pharmaceuticals shipments.

"Overall, this reaffirms the recovery story and boosts optimism that we will probably see an upside surprise to the full-year growth," said United Overseas Bank economist Low Ping Yee.

Low sees GDP growing at 6.1 percent this year, up from her original forecast of 5.5 percent.

Joseph Tan, an economist with Standard Chartered Bank, said the NODX rise "continues to suggest that the export-led recovery remains fairly robust."

"It does indicate that the export growth will continue. I think that's going to be positive for Singapore's growth this year," said Tan, who has revised his full-year GDP forecast to 6.6 percent from 4.5 percent.

Singapore-based DBS Group, Southeast Asia's largest bank, said domestic demand in the city-state is expected to gather steam in the second quarter as private consumption picks up and supports export-led growth.

"Stronger-than-anticipated domestic demand conditions may arise due to liquidity translating into loan growth, abatement of competitiveness pressures and flexible wage policies," a DBS statement said.

"These factors may boost employment and wages in the manufacturing sector and spill over to the service sector," the statement said.

REGION LOOKING STRONGER

China's growing economy and recovery in the US and Japan should also augur well for Singapore and Asia's other export-driven economies, analysts said.

In a pre-emptive strike against inflation to further support the growth momentum, the Monetary Authority of Singapore (MAS) said last week it will allow the local dollar to gradually appreciate against the US currency.

Leslie Tang, an economist with UOB Kay Hian, said he did not expect the Singapore dollar to appreciate to a point that would hurt exports.

"I do not think the [central bank] will allow a sharp rise in the Singapore dollar, so I don't think our export performance will be affected," Tang said.

US demand should continue due to the improving employment situation there, while a strong euro should be a key driver for European imports from Singapore, Tang said.
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