Singapore, 12 August 2009. In better than expected results, Singapore GDP grew 20.7 per cent over Q1 2009.
Admittedly, it was starting from a low base, after sickening lurches downwards. In Q4 2008 it dropped by a record 16.9 per cent, and fell a further 12.2 per cent in Q1.
In annual terms, the economy is still declining. The Q2 2009 GDP figure was 3.5 per cent lower than a year earlier, but this too was slightly better than expected.
Manufacturing did particularly well, boosted by the erratic pharmaceuticals sector. It grew 49.5 per cent. Although it grew the most, it was not the only sector to grow. Construction also jumped up 32.7 per cent, and even the battered financial sector steadied its sea-legs with a 22.8 per cent rise.
So where now for the Singapore economy, and what does it tell the rest of the world? From Korea to Taiwan, Asian economies have been growing this quarter, even as America and Europe continue to falter. Somewhat unexpectedly, the bull market for property has even resumed in Singapore, so much so that the government are looking at measures to cool the market before it gets ahead of
Even though China is increasing its demand for imports from Asian markets, at least 60 per cent of those goods are parts used in goods that ultimately are exported to western economies.
Inventories were run down so much in the last six months that companies are re-stocking. But if there is no equivalent growth in demand, then the recession will assume a 'W' shape. The recovery underway in Singapore and Asia now will run out of steam, and there will be a second lurch downwards. This is a prospect that worries economists in the region.
Business people sound more optimistic. In a Business Times - UniSIM survey published Tuesday 11 August, businesses predict that GDP will grow year-on-year in Q3 by between 0.8 per cent and 1.8 per cent. This is based on an increase in business confidence across 4 areas (sales, profits, orders and prospects) and has in the past been found to be a good predictor of next quarter GDP.
"If this composite prediction bears out, then this recession will have lasted three quarters since Q4 2008 - the same length as the Asian Financial Crisis. It will at once have been less widespread but more intense in the depth of its V-shape", noted Survey Director Chow Kit Boey.
Sentiment has improved in all sectors - from small to large, and across both domestic and international firms. Encouragingly, firms were even more optimistic of improvement in foreign markets than in Singapore.
Small firms in the financial and business services sectors showed the most improvement over the previous quarter. Construction continued to be the star performer - as anyone who lives in Singapore can attest, the city state looks more and more like Dubai every day, in terms of the proliferation of cranes.
Singapore's Ministry of Trade and Industry has forecast an overall GDP drop of 4 to 6 per cent for 2009. This is down from an earlier 8 - 10 per cent forecast, but is likely to improved once more if business sentiment proves accurate. If not, this is a false dawn, and glum economist's W-models will be back in, together with a re-run of the decoupling-is-a-myth story.
Chen Xiulian, EconomyWatch.com