Analysts more upbeat about 2012's outlook

Some private analysts said yesterday that the Government is being overly pessimistic by maintaining an overall growth forecast of 1 to 3 per cent this year amid a stream of positive data.

Analysts from Credit Suisse and DBS said full-year economic growth is more likely to come in at about 3.5 per cent.

The Ministry of Trade and Industry (MTI) said earlier yesterday that the macroeconomic outlook remains "subdued" and "clouded with significant uncertainties".

The United States' recovery will be curtailed by public- spending cuts and continuing weakness in the housing market, said MTI.

It added that European banks have tightened lending, which will weigh on private-demand growth in the economy.

As a result, MTI chose to stick to a cautiously optimistic full-year growth forecast.

The ministry warned that Singapore's full-year growth could be even lower than expected.

It pointed to key risks such as a disorderly default on sovereign debt in the euro zone and an oil-price shock arising from the escalation of tensions in the Middle East.

Credit Suisse economist Wu Kun Lung said: "The euro zone development remains a key risk, but our base-case scenario is that a break-up of the euro zone can be avoided or postponed beyond 2012."

OCBC economist Selena Ling said a global oil-price shock is "only a tail risk for now".

Still, MTI officials said at a media conference yesterday that Singapore needs to be prepared for "more twists and turns" and "greater volatility" in the external environment, and added that they are "comfortable" with the growth forecast of 1 to 3 per cent.

Singapore may avoid a technical recession - defined as two consecutive quarters of contraction - based on near-term economic indicators and the first trade data of the year, said MTI.

"We've started off with quite good trade numbers and it at least gives us a basis to build on," said Dr Thia Jang Ping, director of the economics division at MTI. "We're hopeful that we can do better."

Total trade and non-oil domestic exports (Nodx) growth for the whole of this year is still expected to fall between 3 and 5 per cent.

Singapore's total trade grew 8 per cent last year, while Nodx climbed 2.2 per cent. Latest figures on Singapore's growth in the final quarter of last year showed that the economy shrank less than forecast.

The 2.5 per cent quarter-on-quarter contraction was much lower that a forecast 4.9 per cent contraction, and helped to push up Singapore's full-year growth.

It translated to a year-on-year expansion of 3.6 per cent in the fourth quarter.

For the whole of last year, the economy expanded by 4.9 per cent, marginally higher than the 4.8 per cent forecast.

This was due mainly to a surge in biomedical manufacturing output, which helped offset a contraction in the electronics cluster and slower growth in both the precision-engineering and chemical clusters last year, said MTI.

"Electronics output declined in Q4 because of weak demand from Europe, while the chemicals industry was disrupted by a fire at Singapore's largest refinery," said Mr Leong Wai Ho, an economist with Barclays Capital.

Meanwhile, the finance and insurance sector saw a 9.1 per cent full-year growth on the back of continued expansion in domestic and offshore lending activities, even as stock-trading activities declined.

The accommodation-and- food services and other services industries, grew by 5.8 and 6.7 per cent respectively, on the back of healthy visitor inflows.

Still, last year's 4.9 per cent total growth represents a sharp moderation from the 14.8 per cent growth recorded in 2010.

DBS economist Irvin Seah said that pockets of risk remain in Europe. "We believe that the current poor economic conditions will prevail for a few more months before a more pronounced pickup in growth momentum materialises in the second half of the year," he said.

"The recovery in the US will likely gain momentum and a more solid resolution may be in sight in the euro zone by then.

"As a result, full year GDP growth in 2012 will likely come in at 3.5 per cent."

Singapore's economy to grow 1% - 3% next year

Buffeted by global weakness and uncertainty, Singapore's economy is expected to grow at a sluggish 1 to 3 per cent next year, the Ministry of Trade and Industry (MTI) said on Monday.

And the figure could be even weaker should Europe's debt woes worsen or a full-blown financial crisis erupt in the world's advanced economies, said MTI.

The last time Singapore suffered such weak growth was in 2008, the year the global financial crisis hit, when the economy expanded by just 1.5 per cent. It contracted 0.8 per cent in 2009.

'Global economic conditions are expected to remain subdued in 2012, with the outlook clouded by increased uncertainty and financial volatility,' said MTI.

Stimulus package as S'pore braces for slower growth?

SINGAPORE - Singapore on Monday predicted sharply lower economic growth of 1.0-3.0 percent in 2012 amid an export slowdown and warned the situation could worsen if Europe's debt woes trigger a global crisis.

The figure is off the previous estimate of 2.5-3.5 percent and well down from the five percent predicted for 2011 as demand in the city-state's key export markets in Europe and the United States dries up.

"This does not factor in downside risks to growth, such as a worsening debt situation or a full-blown financial crisis in the advanced economies," the Ministry of Trade and Industry (MTI) said in a statement.

"Should these risks materialise, growth in the Singapore economy in 2012 could come in lower than expected," it added.

The 2011 gross domestic product (GDP) forecast is a huge slowdown from the all-time high of 14.5 percent seen in 2010 when the economy was coming off a 0.8 contraction the previous year.

Singapore's trade-driven economy is regarded as a bellwether for Asia's exporters, which depend heavily on electronics and other manufactured shipments to North America and Europe for growth.

"It looks like the risk is towards the downside," Chua Hak Bin, a Singapore-based economist with Bank of America-Merrill Lynch, said of the implications of Singapore's forecast for the rest of Asia.

"The fact that the tech exports were weak will mean other Asian economies will also see tech exports being pulled down," he told AFP.

Asia's fate will depend to a large degree on whether Europe can contain its debt crisis which has engulfed large economies including Italy and Spain, according to Chua.

Singapore's GDP was valued at S$284.6 billion in 2010, and total trade was more than three times as large.

"The longer the European debt crisis drags out with no clear solutions, it will have a negative impact globally," said Selena Ling, an economist with Singapore's Oversea-Chinese Banking Corp.

"We are starting to see the impact come through."

The MTI said it expects Singapore's electronics industry and other sectors that rely heavily on overseas orders to remain under pressure despite support from Asia's better-performing economies.

Even the financial services sector will be affected by heightened uncertainties in the external environment, it added.

The forecast came as data released separately on Monday by the trade promotion body International Enterprise Singapore showed electronics exports tumbling 17 percent in the third quarter from a year ago.

The ministry's downbeat projections for 2012 came as it released third-quarter figures showing GDP grew 6.1 percent, an improvement from 1.0 percent in the second quarter.

Singapore is a significant producer of high-end telecommunications and computer-related parts shipped to the rest of the world as well as petrochemical and pharmaceutical products.

"Within the manufacturing sector, the electronics cluster is expected to register a lower level of output given the downturn in the global electronics cycle," the MTI said.

Analysts from Nomura financial services group said the government may step in with a stimulus package when the next budget is unveiled in February 2012.

"The size of the stimulus will likely depend on how the external situation unfolds from here... the likely path is such that the first half will be weak before showing some recovery in the second half when we expect the effects of the fiscal response to kick in," they said in a report.