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30-04-2013, 08:39 AM
The pertinent question would be - why are shares hitting a 5-year high if economic growth is expected to be weak? 
Is there a disconnect somewhere?
The Straits Times
www.straitstimes.com
Published on Apr 30, 2013
Economic growth set to remain weak
New data for March does not offer much relief for overall slump
By Chia Yan Min
EconOMIC growth is expected to stay tepid this year, with some economists dialling down growth forecasts on the back of a weak first quarter.
DBS economist Irvin Seah said yesterday that he expects growth in gross domestic product (GDP) to come in at 2.5 per cent for the full year, down from his previous estimate of 3.2 per cent.
"The growth trajectory for the entire year has been lowered due to weaker than expected growth in the first quarter," he said.
His new forecast is now within the official full-year forecast for growth that is between 1 per cent and 3 per cent.
The Government estimated earlier this month that the economy shrank 0.6 per cent in the three months to March 31 compared with the same period a year ago, but this excluded the latest numbers for March, which were recently released.
While much of the slump reflects a slowdown in the economy in the first two months of the year, particularly due to Chinese New Year, March data does not offer much scope for a rebound.
Factory output dipped 4.1per cent compared with March last year - worse than the 3 per cent decline economists had tipped.
UOB economist Francis Tan, who previously expected full-year GDP growth to come in at 3 per cent, said he is likely to revise the figure down to about 2.5 per cent.
"Things are more bleak than what we expected at the start of the year," he said.
But he added that the economy is likely to see a "weak recovery" in the second half.
The central bank had also signalled in its monetary policy statement earlier this month that the economy "should see a gradual improvement for the rest of the year, on the back of a recovery in external demand".
Still, there could be potential headwinds for the economy ahead, said Mr Tan.
"China's growth is a question mark at the moment, and this might have repercussions on full-year growth and even beyond," he said, adding that the outcome of the bird flu situation in China remains unpredictable.
China's economic recovery unexpectedly took a turn for the worse in the first quarter, expanding only 7.7 per cent compared with the same period last year. This was down from the 7.9 per cent growth in the fourth quarter last year and below market expectations of an 8 per cent expansion.
DBS' Mr Seah added that the Singapore economy is "also hampered by the current restructuring process".
"This year will be another year when the growth rate will come in below the inflation rate... The overall growth outlook remains weighed down by this structural drag," he said.
OCBC economist Selena Ling, who is sticking to her full-year GDP growth estimate of 2 per cent, said the poor showing in the first quarter "reinforces our slightly more cautious view".
"The current policy constraints will bite the labour-intensive service and construction sectors... The economy is expected to revert to positive year-on-year growth in the second quarter, with a modest uptick in manufacturing in the second half of the year," she said.
chiaym@sph.com.sg
Is there a disconnect somewhere?The Straits Times
www.straitstimes.com
Published on Apr 30, 2013
Economic growth set to remain weak
New data for March does not offer much relief for overall slump
By Chia Yan Min
EconOMIC growth is expected to stay tepid this year, with some economists dialling down growth forecasts on the back of a weak first quarter.
DBS economist Irvin Seah said yesterday that he expects growth in gross domestic product (GDP) to come in at 2.5 per cent for the full year, down from his previous estimate of 3.2 per cent.
"The growth trajectory for the entire year has been lowered due to weaker than expected growth in the first quarter," he said.
His new forecast is now within the official full-year forecast for growth that is between 1 per cent and 3 per cent.
The Government estimated earlier this month that the economy shrank 0.6 per cent in the three months to March 31 compared with the same period a year ago, but this excluded the latest numbers for March, which were recently released.
While much of the slump reflects a slowdown in the economy in the first two months of the year, particularly due to Chinese New Year, March data does not offer much scope for a rebound.
Factory output dipped 4.1per cent compared with March last year - worse than the 3 per cent decline economists had tipped.
UOB economist Francis Tan, who previously expected full-year GDP growth to come in at 3 per cent, said he is likely to revise the figure down to about 2.5 per cent.
"Things are more bleak than what we expected at the start of the year," he said.
But he added that the economy is likely to see a "weak recovery" in the second half.
The central bank had also signalled in its monetary policy statement earlier this month that the economy "should see a gradual improvement for the rest of the year, on the back of a recovery in external demand".
Still, there could be potential headwinds for the economy ahead, said Mr Tan.
"China's growth is a question mark at the moment, and this might have repercussions on full-year growth and even beyond," he said, adding that the outcome of the bird flu situation in China remains unpredictable.
China's economic recovery unexpectedly took a turn for the worse in the first quarter, expanding only 7.7 per cent compared with the same period last year. This was down from the 7.9 per cent growth in the fourth quarter last year and below market expectations of an 8 per cent expansion.
DBS' Mr Seah added that the Singapore economy is "also hampered by the current restructuring process".
"This year will be another year when the growth rate will come in below the inflation rate... The overall growth outlook remains weighed down by this structural drag," he said.
OCBC economist Selena Ling, who is sticking to her full-year GDP growth estimate of 2 per cent, said the poor showing in the first quarter "reinforces our slightly more cautious view".
"The current policy constraints will bite the labour-intensive service and construction sectors... The economy is expected to revert to positive year-on-year growth in the second quarter, with a modest uptick in manufacturing in the second half of the year," she said.
chiaym@sph.com.sg
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