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19-11-2010, 06:40 AM
Business Times - 19 Nov 2010
S'pore to dodge technical recession on biomed bounce
Overall growth this year likely to touch 15%; it is expected to moderate to 4-6% in 2011
By ANNA TEO
(SINGAPORE) The economy is poised to grow about 15 per cent this year - at the top end of the official forecast - and avert a technical recession in the fourth quarter, the Ministry of Trade and Industry said yesterday. For 2011, it is looking at 4-6 per cent growth - a rather more moderate pace after 2010's sharp rebound but still above trend.
The updated Q3 numbers released yesterday show - as has been well flagged - a steep fall in the growth momentum after a blistering first half, due mainly to a sharp pharmaceutical pullback. The economy grew 10.6 per cent year-on-year in Q3 but contracted by almost 19 per cent in sequential terms.
Excluding the pharma and biomedical cluster, however, economic output in Q3 was at 'roughly the same level' as in Q2, according to MTI, though at least one economist estimates that, with biomed stripped out, GDP probably moderated further in the July to September quarter.
The volatile biomed cluster is now expected to post a strong rebound in Q4 - and help drive growth, thus preventing an earlier anticipated second consecutive quarter of sequential decline.
'If we hit 15 per cent growth for the year, we'll avoid a technical recession,' MTI permanent secretary Ravi Menon said at a media briefing yesterday. Indeed, a 'modest' sequential upturn is expected in Q4, he said.
With the economy having grown 15.6 per cent in the first nine months, Citigroup economist Kit Wei Zheng notes that the full-year 15 per cent growth estimate implies Q4 growth of 13.5 per cent - which he reckons is 'a tad bullish'. He and several other economists estimate that Singapore's 2010 growth will come in at just a little below 15 per cent.
Mr Menon cited 'several bright spots' that will continue to underpin GDP growth in Q4.
Apart from a biomed rebound, the financial services - almost across the board from fund management and private banking to insurance - will continue to flourish, driven by growing wealth in the region.
Then there is also the 'spurt of growth' from the two integrated resorts as they continue to ramp up their operations.
The IRs - together with other activities in the 'arts, entertainment and recreation' cluster collated under 'other services' - are estimated to have grown 18 per cent in Q3, which makes them quite the star performer in the quarter.
'Our estimates suggest that the value-added in this segment is likely to more than double over the course of this year,' Mr Menon said. 'The segment is growing very rapidly, and moving the needle, as it were.'
And, with many IR attractions still coming onstream over the next 18 months, this 'other services' cluster, led by the IRs, will continue to boost growth for 'quite a bit more', he added.
Mr Menon cited the IRs and the biomed cluster - with new plants coming up that will offset, to an extent, recent global consolidation moves by Eli Lilly and Roche - among industry-specific 'pluses' behind the above-trend growth forecast for 2011. According to MTI, the economy's underlying growth potential is 3-5 per cent.
Domestic demand in Asia, particularly China's appetite for consumer electronic products, will also drive intra-regional trade flows and boost Singapore's re-exports.
Not least, the sanguine prospects for 2011 hinge on supportive conditions in the advanced economies, which are expected to see 'weak but steady' recovery, with no slide into recession.
Indeed, there may well be 'some upside' in the latter half of 2011, said Thia Jang Ping, director of economics at MTI, if America's US$600 billion monetary easing achieves its desired effect. 'We may actually get a synchronised boost to the G3 economies in the third or fourth quarter of 2011 in the run up to Christmas,' Dr Thia said.
On the down side, Mr Menon said the two biggest factors are weak US credit conditions - and attendant risks of yet another financial crisis - and growing concerns of a sovereign debt default in the EU.
At home, the electronics industry may well hit the skids as the corporate IT replacement cycle will likely run its course sometime next year. And the construction sector will likely contract in 2011, Mr Menon said, with the completion of a number of key private sector projects this year.
But private sector economists believe the risks to Singapore's 2011 growth forecast are, for now, tilted to the upside.
DBS Bank economist Irvin Seah expects the services sector to pick up some of the slack from the manufacturing sector and lead growth in 2011.
Goldman Sachs' economists also believe that strong growth in employment and earnings will boost consumer spending and domestic demand here. Describing Singapore's economic numbers as good and strong, Deutsche Bank's chief economist for Asia, Michael Spencer, said an average annualised growth pace of 6 per cent per quarter next year would not be unreasonable. His 2011 GDP growth forecast for Singapore stands at 5-6 per cent.
Most economists also reckon that, with rising wages and with little or no slack in the labour market, further monetary tightening is on the cards next year.
S'pore to dodge technical recession on biomed bounce
Overall growth this year likely to touch 15%; it is expected to moderate to 4-6% in 2011
By ANNA TEO
(SINGAPORE) The economy is poised to grow about 15 per cent this year - at the top end of the official forecast - and avert a technical recession in the fourth quarter, the Ministry of Trade and Industry said yesterday. For 2011, it is looking at 4-6 per cent growth - a rather more moderate pace after 2010's sharp rebound but still above trend.
The updated Q3 numbers released yesterday show - as has been well flagged - a steep fall in the growth momentum after a blistering first half, due mainly to a sharp pharmaceutical pullback. The economy grew 10.6 per cent year-on-year in Q3 but contracted by almost 19 per cent in sequential terms.
Excluding the pharma and biomedical cluster, however, economic output in Q3 was at 'roughly the same level' as in Q2, according to MTI, though at least one economist estimates that, with biomed stripped out, GDP probably moderated further in the July to September quarter.
The volatile biomed cluster is now expected to post a strong rebound in Q4 - and help drive growth, thus preventing an earlier anticipated second consecutive quarter of sequential decline.
'If we hit 15 per cent growth for the year, we'll avoid a technical recession,' MTI permanent secretary Ravi Menon said at a media briefing yesterday. Indeed, a 'modest' sequential upturn is expected in Q4, he said.
With the economy having grown 15.6 per cent in the first nine months, Citigroup economist Kit Wei Zheng notes that the full-year 15 per cent growth estimate implies Q4 growth of 13.5 per cent - which he reckons is 'a tad bullish'. He and several other economists estimate that Singapore's 2010 growth will come in at just a little below 15 per cent.
Mr Menon cited 'several bright spots' that will continue to underpin GDP growth in Q4.
Apart from a biomed rebound, the financial services - almost across the board from fund management and private banking to insurance - will continue to flourish, driven by growing wealth in the region.
Then there is also the 'spurt of growth' from the two integrated resorts as they continue to ramp up their operations.
The IRs - together with other activities in the 'arts, entertainment and recreation' cluster collated under 'other services' - are estimated to have grown 18 per cent in Q3, which makes them quite the star performer in the quarter.
'Our estimates suggest that the value-added in this segment is likely to more than double over the course of this year,' Mr Menon said. 'The segment is growing very rapidly, and moving the needle, as it were.'
And, with many IR attractions still coming onstream over the next 18 months, this 'other services' cluster, led by the IRs, will continue to boost growth for 'quite a bit more', he added.
Mr Menon cited the IRs and the biomed cluster - with new plants coming up that will offset, to an extent, recent global consolidation moves by Eli Lilly and Roche - among industry-specific 'pluses' behind the above-trend growth forecast for 2011. According to MTI, the economy's underlying growth potential is 3-5 per cent.
Domestic demand in Asia, particularly China's appetite for consumer electronic products, will also drive intra-regional trade flows and boost Singapore's re-exports.
Not least, the sanguine prospects for 2011 hinge on supportive conditions in the advanced economies, which are expected to see 'weak but steady' recovery, with no slide into recession.
Indeed, there may well be 'some upside' in the latter half of 2011, said Thia Jang Ping, director of economics at MTI, if America's US$600 billion monetary easing achieves its desired effect. 'We may actually get a synchronised boost to the G3 economies in the third or fourth quarter of 2011 in the run up to Christmas,' Dr Thia said.
On the down side, Mr Menon said the two biggest factors are weak US credit conditions - and attendant risks of yet another financial crisis - and growing concerns of a sovereign debt default in the EU.
At home, the electronics industry may well hit the skids as the corporate IT replacement cycle will likely run its course sometime next year. And the construction sector will likely contract in 2011, Mr Menon said, with the completion of a number of key private sector projects this year.
But private sector economists believe the risks to Singapore's 2011 growth forecast are, for now, tilted to the upside.
DBS Bank economist Irvin Seah expects the services sector to pick up some of the slack from the manufacturing sector and lead growth in 2011.
Goldman Sachs' economists also believe that strong growth in employment and earnings will boost consumer spending and domestic demand here. Describing Singapore's economic numbers as good and strong, Deutsche Bank's chief economist for Asia, Michael Spencer, said an average annualised growth pace of 6 per cent per quarter next year would not be unreasonable. His 2011 GDP growth forecast for Singapore stands at 5-6 per cent.
Most economists also reckon that, with rising wages and with little or no slack in the labour market, further monetary tightening is on the cards next year.
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