Published: Thursday, 16 Jul 2009 | 12:29 AM ET

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Singapore's economy has leapt out of recession, expanding in the second quarter at its fastest rate in nearly 6 years, thanks to a surge in biomedical production and construction.

Gross domestic product for the April-June period rose at an annualized and seasonally adjusted rate of 20.4 percent, versus a median forecast in a Reuters poll of 16.4 percent and the first rise after four consecutive quarters of contraction, preliminary government data showed on Tuesday.

From a year earlier, GDP fell 3.7 percent as manufacturing and service industries continued to contract, the data showed. That compared with expectations for a fall of 5 percent.

Analysts remained cautious over the data and questioned its sustainability given volatility in Singapore's drugs output and a weak global outlook, but said other export-dependent Asian
economies were also likely to see improved second quarters.

"This will be the first of a number of GDP reports that will show Asia is recovering after a weak first quarter," said David Cohen of Action Economics. "There is still a lot of uncertainty clouding the global outlook. The unemployment rate around the world is still edging higher, and the market is still nervous about how much momentum the recovery has."

Analysts said this was the biggest jump on a seasonally adjusted and annualized basis since the third quarter of 2003 after the island-state recovered from the SARS outbreak.

The Singapore government revised up its 2009 forecast on Tuesday for the economy to contract by 4 to 6 percent, from a previous projection of a 6 to 9 percent fall.

Analysts said the stronger economic performance might give a short term boost to the Singapore dollar and the stock market, but said it would not change the central bank's stance on the currency, its main monetary policy tool.

"On monetary policy, we might not see any change to it because right now it is at the level where (the central bank) can keep exports competitive," UOB economist Chow Penn Nee said.  "The Monetary Authority of Singapore has said they are quite happy with monetary policy for now."

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The Singapore dollar

SGD%3d loading...

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[SGD=  Loading...      ()   ] traded at 1.4603/17 to the U.S. dollar in the morning Asian session, versus 1.4587 before the data. The stock market rose 1.4 percent, led by banks and property
firms.

Last week, Finance Minister Tharman Shanmugaratnam said neither Singapore nor the world economy had started to recover yet and any recovery would be weak and uncertain.

In the first quarter, the economy shrank at an annualized and seasonally adjusted rate of 12.7 percent and it contracted 9.6 percent from a year earlier.

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