By Teh Shi Ning
SINGAPORE may have grown a modest 1.6 per cent year on year in the first quarter, but the V-shaped rebound in sequential terms has led economists to declare that the economy has turned a corner.
The better-than-expected flash estimates for Q1 gross domestic product from the Ministry of Trade and Industry (MTI) prompted at least one research house to raise its full-year growth forecast.
Others said growth this year is likely to exceed the official forecast of one to 3 per cent, which MTI kept unchanged yesterday.
This probably means Q1 "marks the trough for the current slowdown, as well as for the manufacturing sector", said OCBC economist Selena Ling, who upgraded her 2012 growth forecast from 2 per cent to 2.6 per cent.
The 9.9 per cent jump in GDP from Q4, on a seasonally adjusted, annualised basis, was greater than the market's consensus forecast of a 6.8 per cent rise.
It was also a reversal of Q4's 2.5 per cent contraction. More significantly, the pick-up in growth momentum was driven not by the volatile biomedicals sector, but by a broader-based rebound in manufacturing.
MTI said manufacturing's "healthy sequential expansion" of 14.7 per cent reversed the 11 per cent quarter-on-quarter contraction in Q4, on a seasonally adjusted annualised basis.
Electronics and precision engineering, in particular, churned out higher levels of output in Q1 than in Q4, boosting the turnaround. With global electronics demand now recovering, "the electronics industry is now in the driver seat", said DBS economist Irvin Seah.
And as electronics production still lags behind exports growth, Citi economist Kit Wei Zheng thinks restocking may drive sequential gains in the next three to six months. This could send full-year GDP growth even higher than his above-consensus forecast of 3.6 per cent growth this year, he said.
The economy's broad sectors are expected to contribute to growth on a "more even keel" this year than in 2011, when manufacturing was the key driver, said Ms Ling.
MTI said yesterday that the services sector, too, quickened its pace to grow 6.9 per cent on a quarter-on-quarter annualised basis, with "increased stock market trading activities in the finance and insurance sector, as well as real estate activities in the business services sectors".
Tourism-related activities continued to be "buoyed by continued growth in visitor arrivals", MTI added. Construction surprised too, with a 24.6 per cent sequential surge in Q1 due to a "pick-up in residential construction activities".
While the Monetary Authority of Singapore's policy statement yesterday cautioned that "global growth is likely to remain below trend in the near term", Barclays Capital economist Leong Wai Ho noted that repeated references to Singapore "growing below potential" in last October's policy statement were absent in yesterday's, signalling more optimism.
Even so, others cautioned against a "premature celebration". Mizuho economist Vishnu Varathan thinks Singapore's sequential numbers tend to be highly volatile and "should be taken with a pinch of salt" given the global uncertainties.
Signs of a recovery in global demand are "at best tentative and conflicting" and "sub-trend global demand is likely to pose continued downside risks to Singapore's open economy" in the meantime, he said.
This article was first published in The Business Times.