Singapore GDP expands at record pace

Singapore’s economy expanded at a 26% annual pace in the second quarter after a record surge the previous three months, spurring the nation’s currency and adding to evidence of Asia’s resilience to the European crisis.

Singapore’s growth for the first quarter was revised to 45.9%, the fastest since records began in 1975, the trade ministry said today. Gross domestic product will rise between 13% and 15% in 2010, compared with an earlier forecast of as much as 9%, the ministry said.

A year after Singapore exited its worst recession since independence in 1965, tourists are arriving in record numbers, companies have increased hiring and vessels are leaving the city’s ports carrying more cargo. The island’s strengthening economy has added to an Asian rebound that prompted central banks to raise interest rates in recent weeks, even amid concern that Europe’s fiscal woes will slow the global recovery.

“Singapore will be among the fastest-growing countries not just in Asia, but the world, this year,” said Song Seng-Wun, an economist at CIMB Research Pte in Singapore. “Price pressures are already evident and we expect the central bank to be watching if inflation expectations are raised because of these numbers.”

Singapore’s growth has already prompted the central bank to allow the currency to strengthen to temper inflationary pressures. The Singapore dollar is used instead of interest rates to conduct monetary policy.

Currency Gains
The island’s currency added 0.6% to $1.3745 per US dollar as of 8:23 a.m., bringing this quarter’s gain to 1.4%. Growth last quarter was more than the median estimate for a 23% increase in a Bloomberg News survey of 12 economists.

Policy makers in neighboring Malaysia have raised interest rates three times this year, matching the number of increases by India’s central bank. In Taiwan, Governor Perng Fai-nan moved the key rate 12.5 basis points higher last month and the Bank of Korea unexpectedly increased its benchmark last week.

“With growth likely to remain above trend for the rest of the year, the Monetary Authority of Singapore may be inclined to maintain the policy of gradual appreciation at its October policy meeting,” Wai Ho Leong, a senior regional economist at Barclays Plc in Singapore, said before the report.

Slot Machines
The two casinos run by Genting Singapore Plc and Las Vegas Sands Corp. opened in February and April this year and have since attracted millions of visitors to their slot machines and baccarat and roulette tables.

The economy grew 19.3% in the second quarter from a year earlier, compared with the median estimate for a 17.3% gain in a Bloomberg News survey.

“Growth in the trade-related sectors was bolstered by healthy global trade flows, while the openings of the integrated resorts and higher visitor arrival numbers contributed to the growth in the tourism-related sectors,” the trade ministry said in a statement. “The financial services sector also grew strongly, supported by increased foreign exchange trading and domestic bank lending activities.”

Still, Singapore’s dependence on global trade may mean it’s unlikely to escape the impact of any renewed slowdown. Governments in Europe are embarking on austerity programs to cut budget deficits and households in some of the world’s largest economies are holding back spending, clouding the outlook for the rebound.

Exports Forecast
Singapore’s non-oil domestic exports will probably gain between 17% and 19% in 2010, from a previous projection of as much as 17%, the trade promotion agency said today.

Overseas shipments rose 28.7% in June from a year earlier, after increasing a revised 24.3% the month before, the government said today. Electronics exports by companies including Venture Corp., Singapore’s biggest electronics contract manufacturer, climbed 43.9% in June, while overseas sales by pharmaceutical makers gained 29.8%.

Manufacturing, which accounts for about a quarter of Singapore’s economy, climbed 45.5% from a year earlier in the three months through June, after gaining 38.2% in the three months through March. Pharmaceutical output has at least doubled every month from March to May.

The performance of Singapore’s pharmaceutical industry is volatile as production swings by companies such as Sanofi- Aventis SA can cause industrial output to fluctuate.

The island’s services industry grew 11.4% last quarter from a year earlier. The construction industry gained 13.5%.

Written by Bloomberg
Wednesday, 14 July 2010 09:28