Singaporean Prime Minister Lee Hsien Loong (李顯龍) raised his forecast for economic growth to 2.5 percent to 3.5 percent this year, a sign that Southeast Asia is benefiting from recoveries in the advanced economies.
The government previously predicted growth of 1 percent to 3 percent. The economy expanded 2 percent in the first half, Lee said in a televised message on Thursday on the eve of the country’s National Day. Last year, GDP grew 1.3 percent, the slowest pace in three years.
“We have made steady progress this past year,” Lee said, citing the government’s efforts to tame property prices and curb excess borrowing. “Our economy is holding steady amidst global uncertainties. We are attracting more quality investments. Unemployment remains low.”
Accelerating growth in developed nations such as the US and Japan is helping to cushion the impact of a Chinese slowdown on Southeast Asia. American service industries expanded last month at the fastest pace in five months, complementing a rebound at factories in the world’s biggest economy.
“There are signs that the external economy is showing more signs of stability, be it in the US, Europe or here in Asia,” said Song Seng Wun (宋城煥), an economist at CIMB Group Holdings Bhd in Singapore. “Net exports are likely to add to growth in Singapore and around the region, and that coupled with resilient demand should see a firmer growth trajectory” in Southeast Asia.
Singapore’s GDP probably expanded 14.2 percent in the three months through June 30, according to the median estimate of 11 economists surveyed by Bloomberg News ahead of data due on Monday. Initial government figures released last month showed a 15.2 percent increase, the biggest gain since 2011.
The first-half growth rate announced on Thursday means the economy expanded 3.8 percent year-on-year in the second quarter, Francis Tan, an economist at United Overseas Bank Ltd (UOB), said in an e-mailed statement, adding the forecast exceeded his estimate.
The higher full-year forecast implies a second-half year-on-year growth rate of 3.1 percent to 5 percent, Tan said.
“This is quite strong growth but it’s within UOB’s forecast,” he said. “UOB’s forecast of 3 percent full year GDP growth remains unchanged at this stage.”
A weaker Singapore dollar will also help exporters and industries such as tourism, he said, adding the bank expects the city-state’s currency to reach S$1.30 against its US counterpart by the end of the year. The Singapore dollar traded at S$1.2612 on Thursday.
The Monetary Authority of Singapore stuck to a policy of allowing gradual gains in its currency in April as inflationary pressures curbed scope for monetary stimulus. Consumer price gains accelerated to 1.8 percent in June, after slowing to a 38-month low of 1.5 percent in April.
The bank cut its inflation forecast for this year to 2 to 3 percent, down from 3 to 4 percent, Managing Director Ravi Menon said last month. The current monetary policy is appropriate in containing any re-emergence of strong cost and price pressures as the economy undergoes restructuring, he said.