Economists expect rise in full-year growth forecast

Economists are expecting a more optimistic official growth forecast, thanks to last month's surprise manufacturing surge.

Some believe the current anticipated full-year economic growth range of 2.5 per cent to 3.5 per cent is likely to be revised upwards soon. Others say the Government might narrow the range to a more precise estimate.

A revision could come next month when the preliminary third-quarter growth numbers are unveiled by the Ministry of Trade and Industry (MTI).

Economists widely expect full- year growth to be near or even exceed the upper limit of the current forecast range, given the economy's sterling display in the second and third quarters.

DBS' Mr Irvin Seah and Bank of America Merrill Lynch's Dr Chua Hak Bin are both tipping an upgrade to an official range of 3.5 per cent to 4 per cent.

Mr Seah said: "Even if the economy remains stagnant in the third and fourth quarters, with zero growth on the margin, full-year growth will still be able to clock 3.6 per cent."

Dr Chua said: "Services remain robust, led by financial and wholesale trade services. Transport services are also showing a more visible pickup."

CIMB economist Song Seng Wun told The Straits Times that the release of the revised third- quarter growth figure typically gives MTI the chance to narrow its forecast range for the year.

He is expecting the range to be narrowed to "about 3.5 per cent".

Credit Suisse economist Michael Wan said the Government could hike its full-year growth forecast to 3 per cent to 4 per cent, given the better-than- expected September manufacturing data.

Last month, electronics sector output rose 20 per cent over levels in the same month last year, resulting in an unexpected jump in manufacturing which surprised economists.

It also prompted them to anticipate a likely rise in the third-quarter gross domestic product (GDP) growth number from the advance estimate of 5.1 per cent. Dr Chua projects a 5.3 per cent expansion.

This year began with an official growth forecast of 1 per cent to 3 per cent, which was revised upwards to the current 2.5 per cent to 3.5 per cent range during Prime Minister Lee Hsien Loong's National Day message in August.

A sterling second-quarter expansion of 4.2 per cent paved the way for a brighter-than-expected first-half showing.

The growth momentum was sustained in the third quarter, thanks to a gradual manufacturing rebound and continued service expansion.

This prompted many economists to upgrade full-year forecasts close to the upper end of the official forecast range.

Mr Seah expects the current growth momentum to persist into next year, as the pace picks up in developed economies and China.

"These factors will keep Singapore's GDP growth at a healthy pace in the coming quarters."

alfoo@sph.com.sg

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