Singapore's economy should grow at the top end of official forecasts this year or even beat them after GDP powered to 9.1 percent annual growth in the first quarter, analysts said yesterday.
Strong performances from the manufacturing and services industries drove GDP growth and minimized the impact from a contraction in the construction sector, the Ministry of Trade and Industry said.
The expansion, based on preliminary estimates using data from January and February, was faster than the 8.7 percent annualized growth recorded in the fourth quarter of last year and was at the higher end of economists' projections of 7.5 to 10 percent.
On a quarter-on-quarter seasonally adjusted annualized basis, GDP grew 1.2 percent, sharply slower than the previous quarter's 12.5 percent expansion, the ministry said.
The government has projected GDP to grow 4 to 6 percent this year after posting a better-than-expected 6.4 percent rise last year.
Healthy
But with the healthy first-quarter showing, analysts say growth should be on the higher end of the range or even exceed that.
David Cohen, a Singapore-based regional economist with research house Action Economics, expects this year's GDP growth to hit 6.5 percent.
"We could do a little better than the official target. That would assume that things would not slow down terribly in the second half of the year," he said.
Trade Minister Lim Hng Kiang (
"We expected the first quarter to be strong, building upon the momentum of last year and also because the global economy is doing fairly well," he told reporters.
"Toward the second half of the year, we expect some slowdown, but at the same time this slowdown will be mitigated by a stronger domestic consumption. Overall, I think [for] the year we should finish off in a fairly strong position," he added.
The manufacturing sector, which accounts for almost a third of Singapore's GDP, surged 16 percent in the March quarter, faster than the 14.2 percent year-on-year expansion in the final quarter of last year.
This was "underpinned largely by strong growth in the electronics, biomedical and transport engineering clusters," the ministry said.
For services-related industries, growth surged 7.6 percent "largely driven by a faster pace of expansion in the wholesale and retail trade sector," it added.
Construction blip
The construction sector was the only blip during the first quarter of the year, shrinking by an annual 0.6 percent, but this is an improvement from the 0.8 percent decline recorded in the fourth quarter.
Dutch lender ING Group said in a research note the 9.1 percent growth estimate was the fastest year-on-year rate in the last seven quarters and shows that this year's growth should be on the top range of the official target.
"A good start in first quarter points to more of an upside than downside risk to the official 4 to 6 percent GDP growth forecast for the whole year," said ING, which predicts GDP to climb 6 percent this year.
Leslie Tang, an economist with UOB Kay Hian brokerage, said the export-led economy should maintain its growth momentum heading into the second quarter.
Demand slowing
However, a moderation is expected in the second half as the economy feels the impact of high oil prices and slower demand from key exports markets especially the US.
"It will start to feel the impact of high interest rates globally and domestically and high oil prices.
Plus we are expecting some sort of a slowdown in the US in the second half," said Tang, who maintained his GDP projection for this year at 5.9 percent.
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