Singapore appears on track to turn in stronger growth this year as the export-led economy rides on a global upturn, with most economists tipping expansion of more than 5 percent barring a major shock.
Last year, GDP grew 1.1 percent, faster than the preliminary 0.8 percent estimate but slower than in previous years except in 2001 when the economy was stalled by a recession.
Fuelling the growing confidence is the latest trade report card showing non-oil domestic exports, a leading indicator, growing a solid 25.7 percent in February, exceeding even the most optimistic market projections.
Export orders from the island's major markets, especially from the booming Chinese economy and the EU, were strong and will likely remain on the upside in coming months, economists said.
"I think it is going to be a very strong cyclical recovery which is what most are expecting," Low Ping Yee, economist with United Overseas Bank, said.
"Even in the major economies, we are seeing a synchronized upturn," said Low, who sees Singapore's GDP this year expanding at 5.5 percent, at the top end of the government's forecast of 3.5-5.5 percent.
As a result, the labor market is also expected to improve, with the jobless rate forecast to ease to between 4 percent and 4.5 percent by the end of the year from 4.7 percent last year, the government said.
Assessments have taken on an increasingly upbeat tone after a strong sprint in the final six months of last year reversed a 1.3 percent first-half slump caused mainly by the SARS outbreak in East Asia.
The central bank's latest quarterly poll of economists showed GDP this year is likely to expand an average 5.7 percent, up markedly from the previous three months when they were expecting the economy to grow 5.2 percent.
"The forecasters are generally optimistic about the prospects for the Singapore economy this year as they expect a strong cyclical recovery to take place against the backdrop of a global upturn," the Monetary Authority of Singapore said.
Nizam Idris, deputy head of research at IDEAglobal, believes the city-state has to keep a close watch on its cost competitiveness, an issue which the government has actively tackled in recent years with the rise of China and other neighboring countries as serious rivals.
"Singapore is not a market, the [domestic] market is small," said Idris. "MNCs [multinational corporations] set up here to operate to serve the hinterland which is Asia. If the hinterland offers cheaper alternatives, it will be tough for Singapore."
One way of addressing this is to reduce the economy's dependence on MNCs and take a cue from the Swiss, said Nizam, referring to the landlocked European country's grip on niche industries despite its higher cost base.
"They don't have to compete on wages anymore. They have developed niches in watch making and banking and chocolates," said Idris.
"The question now is, should we wean off our dependency on the MNCs? Shouldn't we be striving towards entrepreneurship?" he said.
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