RTTNews - Singapore raised its economic forecast for 2009, expecting the economy to contract at a slower pace this year. However, the outlook for the rest of the year remains subdued.
Data released by the Ministry of Trade and Industry said Tuesday that the gross domestic product or GDP is now expected to contract by between 4% and 6% this year compared to its earlier forecast of a 6% to 9% contraction.
The revised forecasts reflects the revisions made to the first quarter results, improved second quarter performance and a subdued outlook for the rest of the year, the Ministry said.
In its advance estimates for the second quarter, the Ministry said the economy rose a seasonally adjusted annualized 20.4% in the second quarter from the preceding three months, compared to a revised 12.7% GDP decline in the previous quarter. The latest first quarter GDP estimate represented an improvement over the 14.6% contraction estimated in May and a 19.7% drop estimated in April.
The second quarter GDP is estimated to have fallen 3.7% compared with the same period last year, slower than the 9.6% drop seen in the first quarter.
Among the industries, manufacturing output is estimated to have dropped 1.5% year-on-year in the second quarter, much slower than the 24.3% contraction in the first quarter, mainly due to improved performance of the biomedical sector and an increase in the electronics output due to inventory restocking.
At the same time, construction output growth slowed to 18.3% in the second quarter from 24.4% in the preceding three months.
Services output is estimated to have fallen 5.1% in the second quarter, the same pace as in the first quarter. Most of the service sector industries showed declines on a yearly basis. The wholesale and retail trade industries continued to contract, although at a slower pace, reflecting smaller declines in non-oil domestic exports or NODX and non-oil re-exports or NORX. Financial services also declined at a slower pace, as the general market sentiment improved. However, the hotels and restaurants sector was weighted down by a slump in tourist arrivals.
Meanwhile, the Ministry indicated that despite the improved performance in the second quarter, the outlook for the rest of the year remains weak and susceptible to downside risks. The Ministry said the growth in the biomedical manufacturing output and electronics inventory re-stocking, which contributed to rise in manufacturing output in the first half of the year, may not be sustained.
The report also said that there was no sign of a decisive improvement in the final demand as the global economy continued to be weak. Economies like the U.S and the Eurozone showed rising unemployment and reduced household spending, while the housing markets in many leading economies were yet to bottom out. Further, financial institutions were still in the process of deleveraging.
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