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Singapore's Economy Grows at Fastest Pace in Two Years

Reuters
Monday, 9 Jul 2007 | 9:08 PM ET

Singapore's trade-driven economy beat even the most optimistic forecasts, growing at an annualized rate of 12.8 percent in the second quarter, its fastest pace in two years, thanks to a manufacturing rebound and soaring construction.

Economists said the surprisingly strong data would most likely prompt the city-state's government to eventually raise its full-year 2007 growth forecast, which stands at 5-7 percent.

"By all indications we should be able to do a little better than the 5-7 percent. Over 7 percent should be possible and I should think they'll raise the forecast at some stage. Maybe 6-8 percent would be more descriptive of the outlook," said David Cohen at Action Economics.

The seasonally adjusted rise from the previous quarter compared with 7.6 percent growth forecast by economists in a Reuters poll and followed a revised 8.5 percent expansion in the first quarter of 2007. Quarter-on-quarter growth was the strongest since the 14.5 percent seen in the second quarter of 2005.

Compared to a year earlier, gross domestic product grew 8.2 percent in the second quarter, the Ministry of Trade and Industry said in its advance estimate for the quarter released on Tuesday.

Economists had expected second quarter GDP to grow 6.6 percent from a year earlier.

"Even if GDP was flat in the second half of the year -- which is obviously extremely unlikely -- then it would average 6.7 percent growth -- close to the top of the government's current 5-7 percent range," said Robert Prior-Wandesforde of HSBC.

The advance estimate, based largely on data from April and May, gives an early indication of the economy's performance in the April to June period.

Faster-than-expected growth in the first three months of the year prompted Singapore's government in May to lift its 2007 growth forecast by half a percentage point to 5.0-7.0 percent.

In 2006, the economy grew 7.9 percent.

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