Singapore's Fourth-Quarter Economic Growth Beats Expectations
Growth in Singapore's economy in the fourth quarter was higher than expected at an annualized rate of 7.6% thanks to strong year-end demand for the country's manufactured goods.
The seasonally adjusted advance fourth-quarter figures, based largely on data from October and November, beat the median analysts' forecast in a Reuters poll of 6.2% and was faster than the revised 5.6% pace in the third quarter.
"The Singapore economy continued to grow at a healthy pace," the Ministry of Trade and Industry said in a statement on Wednesday.
Singapore's trade-dependent economy has benefited from three years of strong global growth, with a robust U.S. economy fuelling demand for the city-state's manufactured goods and high oil prices sparking a surge in output in its shipyards. Singapore has, by some measures, the world's busiest port and is home to two of the world's biggest oil rig manufacturers.
But many analysts expect growth to moderate this year, reflecting slower growth in the United States. "I expect growth to moderate to 5.6% in 2007 because of a slight softening of consumer demand in the United States especially in the first half of the year," said Chua Hak Bin, an economist at Citigroup.
The Reuters poll was conducted before a New Year's Eve message on Sunday from Prime Minister Lee Hsien Loong, in which he said full-year growth reached 7.7%, around the middle of the 7.5 to 8% range forecast by the government. Growth in 2007 would slow to between 4 and 6%, Lee said.
Strong growth in 2006 has helped send the Singapore dollar to its highest level against the U.S. dollar in nearly a decade and the Singapore stock market to record highs.
The government has made a big effort to diversify the economy in the face of competition from low-cost countries such as China and Vietnam, spending billions to develop a biotech pipeline and promoting everything from private banking to education to tourism.
Two huge casinos set to open by 2010 are expected to help double tourist arrivals to 17 million a year and triple tourism receipts to S$30 billion (US$19.6 billion) by 2015.
Economists say the formula has helped Singapore reduce some of its dependence on tech exports, long the lifeline of its economic expansion. "The broad-based growth in 2006 was a reflection of the healthy global economy which is ultimately key for Singapore," said David Cohen, an economist at Action Economics. "We saw the long-awaited turnaround in construction and services remain healthy as well."
The island-state drew a record number of tourists in 2006 and created its highest number of new jobs ever.
Solid end-year output in the manufacturing sector, which makes up about a quarter of gross domestic product (GDP), gave a big boost to the economy in the fourth quarter.
GDP grew 5.9% in the quarter from a year earlier, compared with expectations of a 5.5% expansion and following a revised 7.0% growth in the third quarter. Most analysts have forecast slower, albeit still healthy, growth this year, with regional and domestic demand helping to offset any big slowdown in the U.S..
However, in Singapore's property sector some high-end homes are selling at prices not seen since before the financial crisis in 1997/98, and wages in certain sectors are jumping higher.
Against that background, Singapore's central bank is expected to maintain its policy of a gradual, modest appreciation in the Singapore dollar. The central bank conducts monetary policy through the currency rather than interest rates.