Singapore raises growth forecast, sees downside risks for late 2010

Feb 19, 2010, 2:02 GMT

Singapore - Singapore on Friday raised its growth forecast for 2010 and said the economy was expected to rise this year by 4.5 to 6.5 per cent, adding to evidence that Asia is leading the rebound of the world economy.

The upgrade from an earlier forecast of up to 5 per cent growth 'largely reflects increased strength in the near term growth momentum,' the Ministry of Trade and Industry said in a statement.

However, the outlook for the second half of 2010 was uncertain, said the ministry, as private demand in the US, Europe and Japan was still weak, and downside risks remained including sovereign debt risks, especially in Europe.

'These factors could weigh on the pace of growth in major economies, especially in the later part of 2010,' the ministry said. 'Asia is expected to lead a strong recovery in 2010.'

In 2009, Singapore's gross domestic product contracted by 2 per cent after the export-reliant city-state emerged in the third quarter from its worst recession in history.

In the final quarter of 2009, Singapore's GDP expanded by 4 per cent year-on-year, following growth of 0.6 per cent in the third quarter, said the ministry.

Separately, International Enterprise Singapore, the city-state's agency for trade promotion, on Friday upgraded its forecast for the city-state's total trade.

Backed by a recovery in world trade, strong growth in Asia and higher oil prices, the agency now expected Singapore's trade to grow by 9 to 11 per cent in 2010, said the agency, up from its previous prediction of a 7- to 9-per-cent rise.

'The growth of Asian economies will be a boon for Singapore's export growth,' the agency said.

The main downside risks to the 2010 trade outlook include 'a sluggish global recovery, slow recovery in household spending, especially in the US, and high commodity prices, which may impede global growth,' it said.

In 2009, Singapore's total trade slumped 19.5 per cent to 747 billion Singapore dollars (528 billion US dollars), down from 928 billion Singapore dollars in 2008, the agency said.

Singapore's Trade Minister Lim Hng Kiang earlier warned that the recovery in 2010 was expected to be uneven, but the risk of a double- dip recession was low.

'Growth momentum in the second half of 2010 may slow down as the effects of global fiscal stimulus measures and inventory restocking wane,' he told Parliament.

External demand would continue to grow but at a sluggish pace, he said.

'The risk of a return to recession is low in the absence of further financial shocks,' said the minister.