Singapore: Expecting Faster Growth in 2010

Singapore's growth rate in 2010 is expected to accelerate.So says some private sector economists eying signs that the economy is returning to normal.

Let us look at their predictions.

The Singapore Straits Times circa 9 December 2009.

'Growth is tipped to hit 5.5 per cent next year after a 2 per cent contraction this year — based on the median expectations of 20 economists, released yesterday by the Monetary Authority of Singapore (MAS).

This is better than the 4.5 per cent growth they predicted in September, and beats the Government’s official forecast of 3 per cent to 5 per cent growth in 2010.

“The official view tends to be more conservative. This is natural as from a policymaker’s perspective, it is always safer to stay on the cautious end of a forecast,” said DBS Bank economist Irvin Seah.

“But from the private sector perspective, many recent indicators continue to point to a recovery in the global economy.”

Economists are looking at the low base from early this year, when the economy had contracted drastically, to give a boost in growth numbers in the first half of next year.

They are also counting on major economies stabilising so that consumer confidence can rebound and support manufacturing and export activity here.

“While we are not expecting demand to come back in roaring fashion next year, we do expect demand to be good and orders stable,” said Credit Suisse economist Joseph Tan.

Next year, the two integrated resorts will open, which should boost tourism-related sectors. Financial activity and trade are also expected to pick up and in turn make the service economy a stronger engine of growth.

The survey showed that economists are bullish on growth prospects, with most predicting between 5 per cent and 7 per cent growth next year.

But OCBC’s Selena Ling, for one, is still cautious, given that many countries have yet to halt their fiscal and monetary stimulus measures.

“Coming out of the recession, there is still a fair bit of uncertainty about how strong and sustained the recovery will be,” she said.

The Government said last month that the outlook for the second half of next year remains uncertain, although a return to recessionary conditions is not expected.

The survey expects first quarter gross domestic product (GDP) to shoot up 9.6 per cent compared with the same quarter this year, before moderating to between 3.7 per cent and 6 per cent in the following quarters.

Inflation for next year was revised upwards to 2.8 per cent after edging up 0.3 per cent this year, very much in line with the 2.5 per cent to 3.5 per cent the MAS expects.

Economists also expect the local currency to strengthen from S$1.382 (RM3.371) against the greenback at the end of 2009 to S$1.35 by the end of next year. The MAS has kept its exchange rate policy unchanged.

The latest revision caps a wild year that has presented professional forecasters with one of their most challenging times guessing where the economy will go.

In January, economists were predicting the very worst for Singapore, expecting anything from a 5 per cent to 10 per cent contraction as the global economy teetered on the brink of collapse.

But a 2 per cent contraction for the year and 5.5 per cent growth next year now puts the size of the recession in Singapore on a par with the dot.com bust, when the economy shrank 2.4 per cent and then grew 4.1 per cent the following year.

Economists like Seah admitted that the crisis threw assumptions made in forecasting models out the window.

“But we are now going through a state of normalisation, so that’s when we will see forecasting models hopefully starting to work again as the economic relationships return to normal,” he said.

We do hope these economists are right in their crystal-gazing.