Barefoot Investor: Singapore growth probably stalled as Asian recovery slows

Singapore’s expansion probably stalled last quarter as manufacturing declined, presaging easing growth across Asia as rising U.S. joblessness and a widening European debt crisis undermine the global recovery.

Gross domestic product was unchanged in the second quarter from the previous three months, when it climbed an annualized 22.5%, according to the median estimate of 13 economists surveyed by Bloomberg News. The trade ministry will release its advanced estimates for growth at 8 a.m. tomorrow.

Asia’s rebound from the 2009 global recession also faces threats from within the region, with a report today showing China’s growth slowed in the second quarter after higher interest rates curbed consumption. The risks have prompted Malaysia and the Philippines to refrain from raising interest rates in recent weeks, and may put pressure on Singapore to hold off on allowing faster currency gains at its next policy review.
“Risks to economic growth have risen while inflation has passed its peak,” said Irvin Seah, an economist at DBS Group Holdings in Singapore. “The chance of further tightening of the exchange-rate policy has reduced significantly.”
The Singapore dollar, the best performing Asian currency after the Korean won in the past year, pared its gain to 0.4% this month, trading at $1.2237 against its U.S. counterpart at 11:41 a.m. today. It has reached records since the central bank, which uses the exchange rate to manage inflation, said in April it would allow further appreciation to tame price gains.

The city state, home to the world’s second-busiest container port, has remained vulnerable to fluctuations in overseas demand for manufactured goods even after the government boosted financial services and tourism. The island located at the southern end of the 600-mile (965-kilometer) Malacca Strait is among the first countries in the region to report second- quarter data.
Singapore’s consumer prices rose 4.5% in May, easing from 5.5% in January. The central bank, which tightened monetary policy for the third time in a year in April, guides the Singapore dollar against a basket of currencies within an undisclosed band.
The Monetary Authority of Singapore will update its stance in October under its schedule of semiannual statements. The central bank has said that its exchange-rate based policy framework gives it the flexibility to cope with changes in circumstances without having to increase the frequency of the announcements.
China’s economy, Singapore’s biggest single export market in the first five months of this year, expanded 9.5% from a year earlier last quarter after a 9.7% gain the previous three months, a report showed today.
Economic growth in the U.S. slowed to a 1.9% annual pace in the first quarter from 3.1% in the previous three months and the unemployment rate has climbed back above 9%. Ireland joined Portugal and Greece as the third euro- area nation to have its credit rating reduced to below investment grade as Moody’s Investors Service cut its rating to Ba1 this week, while European Union finance ministers struggle to contain the region’s sovereign debt crisis.
New Zealand, due to release GDP figures tomorrow, may report its economy expanded 0.3% in the three months ended March 31 from the prior quarter, when it grew 0.2%, according to the median estimate of 17 economists in a Bloomberg News survey.
Singapore’s economy probably grew 1% in the second quarter from a year earlier, according to the median estimate of 16 economists surveyed by Bloomberg. The government forecasts an expansion of 5% to 7% this year after a record 14.5% pace in 2010.
Growth in the services industry may offset the decline in manufacturing, as companies from Singapore Airlines to hotel operator Shangri-La Asia  benefit from gains in tourism. Tourists are arriving in Singapore in record numbers, lured by the city’s two casinos run by Genting Singapore Plc and Las Vegas Sands Corp.
“Some of the boost from services is seen originating from the continued strong performance of the two integrated resorts, which not only led to increased job offerings, but also helped draw in more tourists and stoked higher retail sales,” said Chester Liaw, an economist at Forecast  in Singapore.
Singapore’s industrial production fell in April and May, posting the first back-to-back decline since 2009. Exports by companies such as electronics manufacturing services provider Venture Corp. are predicted by the government to grow in 2011 at less than half of last year’s pace, when overseas shipments jumped the most since 2003.(The Edge Singapore)


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