Singapore GDP Up 1.8% in Fourth Quarter, Dodges Expected Recession

Why the Worst Is Over for Singapore's Economy
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Singapore's economy grew more vigorously than foreseen in the last three months of 2012, avoiding an expected recession, as gross domestic product (GDP) data for previous quarters was revised downwards.

Singapore's GDP expanded by an annualized 1.8 percent in the fourth quarter from the third quarter after seasonal adjustments, advanced estimates from the Ministry of Trade and Industry showed on Wednesday, reversing a larger than earlier reported 6.3 percent contraction in the July-September period.

From a year ago, Singapore grew by 1.1 percent in the fourth quarter, bringing growth for 2012 to 1.2 percent, down from 4.9 percent in 2011. The government had in November predicted full-year economic growth of around 1.5 percent.

The government had previously said GDP contracted by 5.9 percent in the third quarter at a seasonally adjusted and annualized rate. Second quarter GDP was also revised downwards to show growth of 0.2 percent versus the earlier-reported 0.5 percent expansion.

Most economists had forecast that Singapore's economy would contract in the fourth quarter, sinking into recession like Japan, but their estimates were based on earlier numbers.

Singapore narrowly avoided a recession in the third quarter, when second quarter growth was revised to slow a slight expansion instead of a contraction, surprising forecasters.

Singapore, whose trade is around three times GDP, has been badly hit by the weakness in Western economies that has crimped demand for many of its exports. The Southeast Asian city-state's electronic manufacturers have also failed to tap surging demand for smartphones, unlike rivals in South Korea and Taiwan.

According to the advance GDP numbers, Singapore's manufacturing sector shrank 10.8 percent sequentially in the fourth quarter on an annualized and seasonally adjusted basis, worsening from the 9.9 percent contraction in the third quarter.

"In the near term, it's hard to see any improvement in manufacturing. On the positive side, we've seen a rebound in momentum. Hopefully, services can continue to provide a lift going forward," said Selena Ling, head of treasury research at Oversea-Chinese Banking Corp.

Services grew 7.0 percent in the fourth quarter from the third quarter at a seasonally adjusted and annualized rate. The sector contracted by 3.9 percent in the third quarter.

Prime Minister Lee Hsien Loong said in his New Year address on Monday that the city-state's economy had been dampened by weakness in the United States, Europe and Japan.

"But some industries have also had difficulty hiring the workers they need to grow," he added, alluding to government measures over the past two years to restrict the inflow of low-cost foreign workers.

Lee said Singapore's economy is expected to grow by 1-3 percent in 2013, reiterating the government's earlier forecast.

Singapore has been making it harder for firms to employ low-cost workers from abroad, under pressure from an increasingly assertive electorate which blamed increasing numbers of foreigners over the past decade for soaring property prices, stagnant wages as well as increasingly crowded trains and buses.

Instead of promoting growth via additional labour from abroad, the city-state is now trying to get firms to lift productivity.