Singapore Raises GDP Forecast as Nation Emerges From Recession

By - Shamim Adam

July 14 (Bloomberg) -- Singapore's government raised its economic forecast for 2009 as the economy emerged from the deepest recession since its 1965 independence a mid a rebound in manufacturing and exports.

Gross domestic product will shrink between 4 percent and 6 percent this year, less than an earlier forecast for a contraction of as much as 9 percent, the trade ministry said in a statement today. The economy rose an annualized 20.4 percent last quarter from the previous three months, after shrinking a revised 12.7 percent between January and March, it said.

The revised forecast "reflects the less severe contraction in the first half of the year, while the underlying economic conditions remain weak," the ministry said. The expansion last quarter was better than the median estimate for a 13.4 percent gain in a Bloomberg survey of 12 economists.

Governments worldwide have pledged about $2 trillion in stimulus to counter the global recession, helping stabilize sales by exporters including Japan's Nissan Motor Co. and South Korea's Samsung Electronics Co. The region's stocks are among the world's best performers this year and the International Monetary Fund has raised its growth forecast for emerging Asia.

"If the Singapore economy can report improvement in export and production, it certainly suggests that elsewhere in Asia we will also see some sequential improvement in underlying demand," said Song Seng-Wun, regional economist at CIMB-GK Securities Pte in Singapore.

Bouncing Back

Singapore's $161 billion economy contracted 3.7 percent last quarter from a year earlier, better than the median estimate for a 5.4 percent decline in a Bloomberg survey.

Manufacturing, which accounts for a quarter of the economy, fell 1.5 percent from a year earlier, after sliding a revised 24.3 percent in the three months ended March. Industrial production has gained as pharmaceutical companies boosted output and exports.

"Asia is bouncing back in a V-shaped fashion," said David Carbon, head of economic and currency research at DBS Group Holdings Ltd. in Singapore. "Industrial production is 65 percent back to pre-crisis levels and exports have recovered about one-third of their lost territory.

" India's industrial production increased at the fastest pace in eight months in May, while Malaysia's declined the least in six months. South Korea's output rose more than estimated and China's accelerated. China will release gross domestic product data on July 16.

The Japanese government said yesterday the economy is "picking up," and upgraded its view of exports, business sentiment and consumer spending.

'Peter Out'

Asian policy makers have slashed borrowing costs and pledged more than $950 billion of stimulus plans to boost local consumer and business spending and offset the trade slowdown. The IMF said this month emerging Asian economies will probably expand 5.5 percent this year, more than a 4.8 percent estimate in April.

The faster-than- expected growth "owes to improved prospects in China and India, in part reflecting substantial macroeconomic stimulus and a faster-than- expected turnaround in capital flows," the fund said July 8. "However, the recent acceleration in growth is likely to peter out unless there is a recovery in advanced economies.

" The "volatile" pharmaceutical industry is helping shore up Singapore's economy, said Tai Hui, head of Southeast Asian economic research at Standard Chartered Plc in Singapore.

"If you look at the underlying economy such as the manufacturing of electronics, as well as the services sector, it does seem like the growth momentum has yet to fully recover," the economist said.

Las Vegas Sands

Singapore's services industry declined 5.1 percent last quarter, after shrinking by a similar pace in the first three months of the year. The construction industry gained 18.3 percent last quarter as Las Vegas Sands Corp. and other developers worked to complete hotels, office towers and condominiums.

"Singapore's recovery will be more pronounced than others in the region because pharmaceuticals swung the industrial production numbers a lot more than it did in other countries," said Vishnu Varathan, a regional economist at Forecast Singapore Pte. "We'll really be getting ahead of ourselves to say the recession is in the rear view mirror. Output levels are still well off where we were before the crisis."