Singapore's economy surges as biomedics fight swine flu
Updated
Singapore has become the first Asian economy that is currently in recession to record positive economic growth. Its economy surged over 20 per cent in the second quarter this year, defying the expectations of even the most optimistic of forecasts. Singapore's trade ministry has credited the country's biomedical and electronics industries with creating the surge. In a sense, Singapore has swine flu to thank for its economic recovery.
Presenter: Girish Sawlani
Speaker: Alvin Liew, economist, Standard Chartered, Singapore; David Cohen, director, asian economic forecasting, Action Economic
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SAWLANI: Singapore was the first Asian country to be hit by the current global economic crisis, slipping into its worst recession since independence. Its export reliant economy was battered by sharp falls in international demand for goods and services. But its economy has now staged a dramatic comeback - with Gross domestic product soaring by 20.4 per cent. The figures have surprised analysts who were expecting an average of only 14 per cent in economic expansion.
LIEW: Clearly, it has surprised us and I think when you look at the market's median expectations, it's much higher than the expectation itself.
Alvin Liew is an economist with the Standard Chartered Bank in Singapore. He says the quarterly surge was primarily led by the biomedical sector and, to a lesser extent, the electronics industry.
LIEW: For the electronics industry, the previous two quarters, we have seen a large draw-down of inventory and that this current slight pickup for them itself was a re-stocking process. And for biomedical, we believe that it was largely the global de-balance from the flu pandemic that has driven up output possibly for flu-related pharmaceutical output that has seen the sharp surge in biomedical production in recent months.
SAWLANI: But he also says that the biomedical sector should not be seen as a catalyst for future growth.
LIEW: It's highly volatile, whereby the strings can range from a hundred per cent expansion in one month and more than 50 per cent contraction in the next. It's quite a common feature in this sector itself. So, it is fairly hard to predict, going forward, how the sector will actually perform.
SAWLANI: Singapore's Ministry of Trade and Industry has, however, taken the sharp growth figures as a signal to revise its GDP forecast for the year. It now expects the economy to contract by four to six per cent, as opposed to an earlier projection of six to nine per cent.
But Alvin Liew says Singapore is unlikely to fully emerge from the recession before the end of the year.
LIEW: If you're looking at the full year numbers, it will still be a contraction because of the sharp slowdown we have seen in the first quarter and even in the second quarter, it was still a negative number. Going forward to the third quarter, we expect, on a year on year basis, for it to still be negative and it's possible we'll see a very slight return to growth only in the fourth quarter in 2009. So, on the full year itself, it will still be a recession year.
SAWLANI: Singapore's second quarter performance has indeed raised expectations of other Asian economies hit by the recession to post positive results.
David Cohen is the director of Asian economic forecasting with Action Economics.
COHEN: This should be the first of a series of reports showing positive growth, quarter on quarter. Korea, in fact, has shown one of the healthier rebounds. Their second quarter growth should be something approaching maybe eight to nine per cent, quarter on quarter, annualised rate. And even Japan is expected to show quarter on quarter growth in the second quarter - the first positive growth in five quarters for the Japanese. And of course China, which shows - although they never actually contracted - that their growth did slow in the first quarter to the slowest year on year increase in a dozen years, but it's still encouraging that there are signs of pick up in Asian growth in the second quarter.
SAWLANI: But for such recovery to take place across Asia, David Cohen says a lot will depend on demand increasing for Asian goods in Europe and the United States.
COHEN: Like everyone else that had experienced the sharp fall off at the end of last year, into early 2009, now much will depend on whether the global demand can sustain the tentative improvement that we've seen in the last couple of months, and of course, much will depend on the performance of the US and the European economies, which probably were hit hardest by the financial crisis.
SAWLANI: And with those economies far from recovery, Asia will be looking for ways to decouple itself from the West.
