DBS Bank yesterday raised its forecast for GDP growth to 3.5 percent for this year, from the previous estimate of 3.3 percent, after the nation’s economy posted better-than-expected economic data for last quarter.
The upswing might continue into the second half of the year, as the global economy recovers further, contributing to a cyclical upturn in the electronics industry, the Singapore-based banking group said in a report.
The nation’s export-reliant economy expanded 3.8 percent during the April-to-June period, the fastest increase in six quarters, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said last week.
On a quarter-on-quarter basis, GDP rose 5.9 percent, up from 1.9 percent in the first quarter, according to DGBAS statistics.
Exports and investment were the main contributors to faster growth in the second quarter, the DGBAS said.
“The export-led recovery looks set to be maintained moving forward given the positive results in the latest leading indicators, including export orders growing 10.6 percent in June and the Purchaseing Managers’ Index staying in the expansion zone at 55.8,” the DBS Bank report said.
Global technology giants are rolling out new-generation devices, which is favorable to local manufacturers due to their position in the supply chain, the report said.
On the domestic front, inflationary pressures remained moderate in the second quarter and might slow down in the wake of selective credit control policies, the report said.
The property and credit markets are facing pressure after the central bank introduced a new round of tightening measures in June to curb mortgage lending and cool the property market, the report said.
In addition, there are factors which might dampen consumer confidence and limit spending, DBS said, pointing to the bad weather of the typhoon season, the plane crash in Penghu and the gas pipeline explosions in Greater Kaohsiung.
“With export recovery to be partly offset by a slowdown in consumption, we think GDP growth should see a modest improvememt in the second half,” the report said.
Howver, the government’s current GDP growth forecast of 2.98 percent is too conservative and the DGBAS is set to upgrade the estimate during its review next week, DBS said.
The growth seen in the nation’s economy should give the central bank confidence to hike interest rates by 12.5 basis points at its year-end meeting, DBS said.
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