Singapore GDP growth slows

Singapore's economy grew at an annualised rate of 1.1 per cent in the second quarter, below market forecasts, as the pace of output for drugs and high-tech goods slowed, data showed today.

The economy grew for the fifth straight quarter after seasonal adjustments, compared with the median forecast in a Reuters poll for growth of 1.4 per cent.

The economy had expanded at an annualised clip of a revised 7.0 per cent in the first quarter and at a rate of 12.5 per cent in the final quarter of 2005, the Ministry of Trade and Industry said in its advance estimate for the quarter, which is based largely on data from April and May.

"Looking at the sharp slowdown in the manufacturing sector, there seem to be pockets of weakness, particularly in the electronics sector," said Chua Hak Bin, an economist at Citigroup.

Compared to the second quarter of 2005, gross domestic product (GDP) was 7.5 per cent larger, matching economists' median forecast in a Reuters poll.

Singapore provides an early indication of economic conditions in Southeast Asia because it is the first country in the region to report GDP figures each quarter.

Singapore's manufacturing sector grew 10.2 per cent from a year ago, a sharp slowdown from the 20.2 per cent annual clip in the first quarter.

"We think there is a possibility of a shallow downturn in the tech sector in the second half," Chua said.

Singapore's economy has expanded on an annualised basis since the second quarter of 2005, helped by strong global demand for its manufactured goods and a pick-up in the domestic sector.

In the first quarter, Singapore created the biggest number of jobs in more than a decade, and tourist arrivals are on the rise, boosting consumer confidence and lifting retail sales.

Singapore's service sector grew in the second quarter by 6.8 per cent from a year ago, compared with 8.2 per cent in the first quarter.

But with rising interest rates and oil prices at record highs this month, there are risks to the growth outlook, economists say.

Singapore relies heavily on export markets, particularly in the United States and the European Union.

The country's long-ailing construction sector shrank again, contracting in the second quarter by 0.3 per cent from a year ago, following a 0.8 per cent contraction in the first quarter.

But economists said a pick up in private projects would fuel growth in the construction sector later this year.

The central bank said last month that the economy remained on track to grow 5 to 7 per cent in 2006, despite recent volatility in world financial markets, after expanding 6.4 per cent in 2005.

- REUTERS