SINGAPORE - Singapore's economy grew at a better-than-expected pace in the second quarter and the government raised the city-state's outlook for the year on expectations for a gradual pick-up in global growth in coming months.
The wealthy Southeast Asian nation, whose economy is heavily reliant on trade, manufacturing and financial services, said gross domestic product (GDP) expanded 15.5 per cent in April-June on a quarter-on-quarter, seasonally adjusted and annualised rate, faster than the advance estimate of 15.2 per cent.
The growth outlook for the year was also raised to 2.5 to 3.5 per cent from an earlier forecast of 1-3 per cent.
Singapore Prime Minister Lee Hsien Loong had disclosed the upward revision in the growth outlook during his National Day address on Thursday, but the strength of some of the sectors in the second quarter still came as a surprise to many forecasters.
"Nobody expected the large upward revision in services,"said Barclays economist Joey Chew. "I had expected a pullback in financial services after the strong Q1 and the market volatility in June."
Financial services expanded by 9.2 per cent at an annualised quarter-on-quarter pace following a 51.2 per cent expansion in the first quarter, while wholesale and retail trade surged by 22.1 per cent even as trade agency International Enterprises Singapore (IE Singapore) said trade and exports growth this year will likely be below its earlier forecasts.
Singapore's manufacturing sector, which has been in the doldrums for over a year, grew by 32.1 per cent in the second quarter from the first at an annualised and seasonally adjusted pace, turning around from a 12.1 per cent contraction in the first three months of 2013.
The strength in wholesale and retail trade services, despite the weak Singapore trade data so far this year, indicated that local firms are increasingly serving exporters in other countries and that trade did not have to be routed through the city-state, Barclay's Chew added.
The Singapore dollar strengthened slightly on the back of the stronger-than-expected GDP data and bullish outlook, although a central bank official said the city-state's monetary policy stance of allowing a modest and gradual appreciation of the local currency remained appropriate.
From a year ago, the Singapore economy grew by 3.8 per cent, faster than the preliminary estimate of 3.7 per cent reported earlier.
Economists polled by Reuters had median estimates of 14.0 per cent for quarter-on-quarter growth and 3.4 per cent for year-on-year expansion.
Singapore has been grappling with slow growth and relatively high inflation in recent years amid weakness in key export markets. Tighter local restrictions on foreign workers also have raised costs and made it harder for successful firms to expand.
Singapore officials were, however, bullish about the economic outlook, citing improvements in the United States and bottoming out of the Eurozone economy that will likely offset a slowdown in China.
"Externally-oriented sectors like manufacturing and transportation and storage are likely to provide support to growth, in line with the gradual pickup in the global economy,"the Ministry of Trade and Industry said in a statement.
Still, it said that Chinese efforts to promote more sustainable growth could have unintended consequences such as an excessive tightening of liquidity, which could lead to a sharp slowdown in growth and have spill-over effects on export-oriented Asian economies.
"Domestically-oriented sectors such as construction and business services are also expected to remain resilient," it added, echoing comments made by the central bank last month.