Singapore GDP expected to grow 3 – 5% in 2010

After the advance estimate made a month back, the Ministry for Trade & Industry (MTI) firmed the GDP growth rate for the third quarter to be 0.6 per cent expansion when compared to the corresponding period of last year.

 

The year-on-year comparison has gone into positive territory for the first time after three quarters of contractions:

 

3Q 2008        0.0%

4Q 2008        -4.2%

1Q 2009        -9.5%

2Q 2009        -3.3%

3Q 2009        +0.6%

 

This signifies a V-shape recovery with the bottom in the first quarter ended 31 March 2009. Will it still be positive growth in the final quarter of this year? From the official forecast of MTI, it will be so moving into 2010 (bearing in mind that Quarter 4 of 2008 was a dismal quarter for the economy then). The forecast for next year was set at 3 to 5 per cent GDP growth rate.

 

On a whole, 2009 will still see a contraction of between -2.5 to -2.0 per cent due mainly to very poor performance during the first half of the year. This recession only lasted for one year in 2009 since we see a marginal positive growth of 1.1 per cent in 2008. Not bad considering that the world was fearing a recession similar to the Great Depression of 1930s at the height of this economic downturn.

 

There are still concerns for the economy going forward:

1.  Economies were powered by government stimulus packages. What will happen, if the stimulus packages are withdrawn?

2. US’ public debt had ballooned to US$12.031 trillion. How will this impact the value of US$?

3. When interest rates rise again to combat asset price inflation, how will this choke the fragile economic growth?

4. US consumers are saving more now than spending freely in the past because of this crisis. How will this affect our export to the US?  

 

For now, it is cautious optimism that the world has learned its lessons brought on by the financial crisis.

 

Inflation Rate

 

Inflation rate for 2010 was predicted to be 2.5 to 3.5 per cent higher than 2009. 2009 will see inflation of zero per cent over 2008 as forecasted. But 2008 inflation was 6.5 per cent. We will have to get used to high prices brought on since 2008 when the inflation rate was the highest in recent years.

 

 

Written on 11/20/2009 11:26 AM

 

Copyright © 2009, the author known as LKT in Singapore.

 

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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