Singapore's economy will probably expand between 8 percent and 9 percent this year, Prime Minister Goh Chok Tong said, raising the forecast for the third time in six months amid surging exports of computer chips and medicines.
"Everything is in good working order. The economy is going strongly," Goh said in a National Day speech, his last as prime minister. "Now is a good time for me to hand over the controls to a new captain and his crew."
Goh, who steps down Thursday after 14 years in office, is handing over an economy poised to expand at its fastest pace in four years. With the US$91 billion economy expanding 10 percent in the first six months, Prime Minister-designate Lee Hsien Loong is set to preside over full-year growth matching that of China, the world's fastest growing major economy.
"Confidence in Singapore was very strong, the investment climate was better" in the last quarter, Tay Eng Hoe said, chief executive of ECS Holdings Ltd, which sells computers and other electronics products in Asia. "We are confident that the second half will still be good for us."
Last year, growth halved to 1.1 percent after the war in Iraq slowed global trade and an outbreak of severe acute respiratory syndrome hurt tourism and retail sales.
With the war over and SARS brought under control, Singapore has enjoyed an economic rebound on the back of surging exports of semiconductors, pharmaceuticals and a surge in tourism that's filled hotel rooms and malls, boosting sales of everything from Honda sedans to Rolex wristwatches.
The economy has expanded for four straight quarters. Growth in the April to June period was estimated 11.7 percent from a year earlier. Singapore's exports surged 21 percent in the second quarter from a year earlier and 17.8 percent in the first six months of the year, according to International Enterprise Singapore, the trade promotion agency.
Singapore is also benefiting from tax breaks and other incentives offered by the government to attract investments by drug companies including GlaxoSmithKline Plc and Pfizer Inc, reducing reliance on production of disk drives and other electronics.
Pfizer last month announced a US$352 million ingredients factory in Singapore, and chief executive Hank McKinnell said the world's largest drugmaker may build a second facility on the island.
Still, manufacturing activity in Singapore unexpectedly slowed in July as factories reported fewer orders and lower production, the Singapore Institute of Purchasing and Materials Management's purchasing managers' index showed this week. Manufacturers may be cutting back as demand slows in the US and China, economists said.
US growth slowed in the second quarter as consumers reduced spending. China's growth unexpectedly slowed in the same period, suggesting government lending curbs are cooling the world's fastest-growing major economy.
Chartered Semiconductor Manufacturing Ltd (特許), the world's third-biggest provider of made-to-order chips, last month cut its sales forecast on slowing demand from makers of parts for cell phones and networking gear. It said sales will be little changed in the third quarter from the second. Chartered had earlier forecast a 7 percent gain. Its shares have fallen almost 36 percent this year.
A 37 percent rise in oil prices this year may also moderate growth in the second half, said Chua Hak Bin, an economist at DBS Group Holdings Ltd, Singapore's biggest lender by assets.
Besides, the unemployment rate was unchanged at 4.5 percent in the second quarter as the economic expansion failed to accelerate the pace of job creation.
The economy added 10,400 jobs in the three months ended June, the Ministry of Manpower said, less than the 13,700 jobs created in the first quarter and 16,200 in the final quarter of last year.
"We must expect lower-skilled jobs to migrate to lower-cost countries," Goh said yesterday. "Older, less-educated workers will have to be retrained."
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