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Singapore's strong growth eases fears of a recession

"This is a lot stronger than expected ... all three sectors did better than forecast."

Nizam Idris, IDEAglobal economist

Fears of a recession in Singapore eased yesterday after the government released preliminary figures showing the economy grew a sharper-than-expected 3.9 percent year-on-year in the second quarter.

The Southeast Asian city-state's economy grew 12.3 percent compared with the three months to March, according to the Ministry of Trade and Industry estimates that are largely based on April and May data.

The second quarter performance exceeded forecasts, with the markets largely expecting a year-on-year gain of between 1.8 percent and 3.5 percent.

"This is a lot stronger than expected ... all three sectors did bet-ter than forecast," said IDEAglobal economist Nizam Idris, whose own prediction had been for year-on-year growth of 2.3 percent.

There had been some fears of a technical recession if the economy continued to struggle after it contracted by 5.5 percent on a quarterly basis in the first three months of the year.

A technical recession is defined as two consecutive quarters of negative quarterly growth.

Singapore's worse-than-expected start to the year led the government to cut its growth forecast for the year from 3 percent to 5 percent to 2.5 percent to 4.5 percent.

Now, economists are confidently forecasting growth to be near the top end of the official target.

DBS Bank's Chua Hak Bin said yesterday's figures showed a second-half upswing was almost certainly on the cards and growth this year would most likely come in at 4.2 percent.

An economist with GK Goh Brokerage, Song Seng Wun, had revised down his growth forecast from 3.6 percent to 2.8 percent after weaker-than-expected manufacturing and export data in April and May.

Following the preliminary second-quarter numbers, Song revised his growth forecast back to his original figure of 3.6 percent.

"These are stronger than expected numbers so we will have to bump it back up to where it came from," Song said.

Another factor to take into consideration, Song said, was the government revising up the year-on-year growth figure for the first quarter from 2.5 percent to 2.8 percent.

Nizam, who is maintaining his full-year growth forecast at 3.8 percent, said the main driver of the stronger numbers for the second quarter was the services sector, which grew 4.2 percent.
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