Singapore economy rises from recession

SINGAPORE - Singapore's Government raised its economic forecast for the year as gains in construction and pharmaceutical output lifted the nation from its deepest recession since independence in 1965.

Gross domestic product will shrink 4 per cent to 6 per cent this year, less than an earlier forecast for a contraction of as much as 9 per cent, the trade ministry said yesterday.

The economy expanded an annualised 20.4 per cent last quarter from the previous three months, the first growth in a year.

"The Singapore economy is back, and back with a vengeance," said Robert Prior-Wandesforde, a senior economist at HSBC Holdings in Singapore. "We think other drivers of growth will come through as the year progresses, ensuring that, although bumpy, the recovery is likely to be sustained."

Singapore stocks advanced after the report, led by the country's biggest developer, Capitaland, on optimism a combination of tax cuts and record government spending will support recovery.

South Korea and Japan have said their economic outlook is improving and the International Monetary Fund raised its forecast for emerging Asia last week.

The benchmark stock index climbed 1.3 per cent.

"Across Asia, things are not going to be as bad as everyone thought at the beginning of the year," said Song Seng-Wun, regional economist at CIMB-GK Securities in Singapore.

"For export-oriented Asian economies, the drag from the manufacturing sector is going to be less than forecast."

Governments worldwide have pledged about US$2 trillion in stimulus to counter the global recession, helping stabilise sales by Asian companies.

Goldman Sachs, Morgan Stanley and the World Bank have in the past month raised forecasts for China which is due to release GDP data tomorrow.

Singapore's trade ministry said the revised 2009 GDP prediction "reflects the less severe contraction in the first half of the year, while the underlying economic conditions remain weak." The expansion last quarter was better than the median estimate for a 13.4 per cent gain in a Bloomberg survey.

Manufacturing, which accounts for a quarter of the economy, fell 1.5 per cent from a year earlier, after sliding a revised 24.3 per cent in the three months ended March.

"Asia is bouncing back in a V-shaped fashion," said David Carbon, of DBS Group Holdings in Singapore. "Industrial production is 65 per cent back to pre-crisis levels and exports have recovered about one-third of lost territory."

India's industrial production increased at the fastest pace in eight months in May, while Malaysia's declined the least in six months.

- BLOOMBERG