Singapore's Economy Probably Slowed on Fewer Electronic Exports

Singapore's Economy Probably Slowed on Fewer Electronic Exports

By Shamim Adam

April 9 (Bloomberg) -- Singapore's economic growth probably slowed in the first quarter as factories trimmed production in response to easing demand for the island's electronic exports.

Gross domestic product grew an annualized 4.9 percent in the three months ended March, decelerating from a 7.9 percent pace in the previous three months, according to the median forecast of nine economists in a Bloomberg News survey. The trade ministry's report is due at 8 a.m. in Singapore tomorrow.

Weaker demand from the key U.S. market is hurting Singapore and other Asian export-oriented economies, which are almost twice as reliant on overseas sales as the rest of the world. The Asian Development Bank and the World Bank both expect slower growth this year in the region, where Singapore's government is the first to report first-quarter figures.

``The bulk of the moderation came from the goods-producing sector,'' said Song Seng Wun, regional economist at CIMB-GK Securities Pte in Singapore. ``It's a trend we will see reflected across Asia, ranging from a mild to sharp slowdown, as a result of a deceleration in trade activities. China will probably be one of the few exceptions.''

From a year earlier, Singapore's economy probably expanded 5.5 percent in the first quarter after growing 6.6 percent in the previous three months, according to the median forecast of 16 economists in the Bloomberg survey. That would be the slowest pace in two years.

The government in February raised its 2007 forecast for the $134 billion economy to between 4.5 percent and 6.5 percent from a previous range of 4 percent to 6 percent. Southeast Asia's fourth-largest economy grew 7.9 percent in 2006.

`U.S. Downturn'

Economists surveyed by Bloomberg expect an expansion of 5.5 percent in 2007. That would be the weakest growth since 2003, when the rate was 3.1 percent.

The World Bank last week said growth in East Asia, which excludes Japan and the Indian subcontinent, will soften to 7.3 percent this year from 8.1 percent in 2006 as the ``emerging U.S. downturn'' crimps demand for the region's exports. The Asian Development Bank expects growth in Asia excluding Japan and Australia to be 7.6 percent in 2007, from 8.3 percent last year.

Singapore's electronic exports declined four times in the five months between October and February as semiconductor and disk drive shipments fell. The electronic goods and gadgets account for about 29 percent of the city-state's manufacturing and about half of Singapore's overseas sales.

Pharmaceuticals did not do much better. Drugs output, which accounts for over a fifth of manufacturing, fell in February, while exports were the least in five months.

Oil Rigs

International Enterprise, the Singapore government's trade promotion body, on Jan. 17 said it expects non-oil exports to grow between 7 percent and 9 percent this year, after gaining 8.5 percent last year. Electronic shipments may grow about 4 percent this year, International Enterprise said.

Transport engineering companies, completing contracts for ship building and repair, as well as the construction of oil rigs, have helped offset the production slowdown at electronic and pharmaceutical plants.

Companies such as Keppel Corp. and SembCorp Marine Ltd. have won contracts worth billions of dollars and are poised to receive more from oil companies that are stepping up exploration and production as global demand for energy grows and crude prices rise.

``The transport engineering segment is still extremely busy, with very strong growth likely to continue,'' Song said. ``As long as oil prices stay around these levels, more players will enter and boost demand for rigs and ships.''

Hotels, Restaurants

The island's services industry is also expanding as employment and wage gains boost spending. Credit-card billings in the first two months of 2007 rose 19 percent from a year ago to S$3.25 billion ($2.15 billion).

Revenues at hotels, restaurants and department stores are also rising as more tourists visited the city and stayed for a longer period. More than 1.57 million visitors arrived in January and February, the best start for the year ever, according to the tourism promotion board.

Singapore is adding attractions such as casino-resorts and increasing convention space to draw tourists and invite companies to hold more trade shows and exhibitions. It expects arrivals to rise 5 percent to 10.2 million in 2007. Tourism spending may reach S$13.6 billion this year, from S$12.4 billion in receipts in 2006, Trade and Industry Minister Lim Hng Kiang said on Feb. 8.

The move to attract tourist dollars has also benefited the construction industry.

Ferris Wheel

Las Vegas Sands Corp., the world's biggest casino-operator by market value, has started building work on Singapore's first gaming center which will have 2,500 hotel rooms and a 1.2 million square foot convention center among other facilities when it opens in 2009.

The government is spending S$2 billion to build infrastructure for the Marina Bay area including a bridge linking attractions around the site such as the casino resort and the world's largest Ferris wheel.

Real estate developers are also taking advantage of rising property prices to tear down old condominiums and build new ones. Singapore's private home prices posted their biggest quarterly gain in seven years in the first quarter, rising 4.6 percent. Dwindling supply for office space has also led the government to plan to sell more land in the central business district.

CapitaLand Ltd., Singapore's biggest developer by sales, sold new apartments in the Orchard Road shopping belt at prices exceeding S$4,000 a square foot. Keppel Land Ltd., the third- biggest, started selling more than a quarter of the 1,129 units in its waterfront project, Reflections at Keppel Bay, this month.

The following table gives forecasts for the percentage change in gross domestic product from a year earlier and the annualized, seasonally adjusted change from the previous quarter:



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GDP GDP GDP
Firm YoY QoQ saar 2007
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Median 5.5% 4.9% 5.5%
Average 5.4% 4.3% 5.5%
High 6.4% 6.7% 6.2%
Low 4.1% -0.4% 4.9%
Number of Estimates 16 9 10
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Action Economics 5.6% 5.2% 5.5%
Capital Economics Ltd. 5.4% 4.5% --
CIMB-GK Research 5.7% 5.5% 5.6%
Citigroup 6.0% 6.7% 6.2%
Credit Suisse 6.4% -- --
DBS Bank 4.8% -- 5.7%
Forecast Ltd. 5.9% -- 6.1%
HSBC Singapore 5.0% 2.9% 4.9%
ING Groep NV 5.5% 4.9% --
Lehman Brothers 5.5% 4.9% --
OCBC Bank 5.4% -- 5.2%
Standard Chartered 5.2% 4.3% 5.5%
Thomson IFR 5.2% -- --
UBS 6.0% -- --
UOB Group 4.1% -0.4% 5.2%
UOB Kay Hian Research 5.2% -- 5.2%
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To contact the reporter on this story: Shamim Adam in Singapore