Singapore’s economy grew at the fastest pace in more than two years last quarter as services strengthened and manufacturing rebounded, reducing pressure on the central bank to ease monetary policy.
Gross domestic product rose an annualized 15.2 percent in the three months through June from the previous quarter, when it grew 1.8 percent, the Trade Ministry said in a statement today. That exceeded all 12 estimates in a Bloomberg News survey, where the median was for an 8.1 percent expansion.
Rising local demand has shielded some Asian nations from an uneven global recovery, with Singapore’s jobless rate near a five-year low. The Monetary Authority of Singapore has let its dollar weaken about 3 percent against the greenback in the past six months, boosting the island’s export competitiveness.
“The rapid expansion of manufacturing was a little stronger than we anticipated, while we are encouraged to see the sustained pick up in the services sector,” said Daniel Wilson, an economist at Australia & New Zealand Banking Group Ltd. in Singapore. “The persistence of growth will depend on the external sector.”
The Singapore dollar strengthened after the report, before trading little changed at S$1.2601 against the U.S. currency as of 11:05 a.m. local time.
GDP (SGDPYOY) expanded 3.7 percent last quarter from a year earlier, better than the 2 percent median in a separate Bloomberg survey. The government forecasts growth of 1 percent to 3 percent in 2013. Economists at Citigroup Inc. and Barclays Plc raised their predictions for full-year growth after today’s report.
“The sharp rebound largely reflected the strong growth in the output of the biomedical manufacturing and electronics clusters,” the Trade Ministry said, citing the quarter-on-quarter data.
While electronics output has recovered, exports by companies such as Venture Corp. have dropped for 10 straight months through May, the longest string of losses since 2009. Analysts have lowered their estimate for the island’s export expansion this year to 2.5 percent from 4 percent, according to a survey by the central bank last month.
“We are expecting a patchy expansion in the second half of the year,” said Kit Wei Zheng, a Singapore-based economist at Citigroup. “We won’t be surprised if there will be a pull-back in growth in the third quarter on weaker sentiment and modest spillovers from a slowdown in China.”
Located at the southern end of the 600-mile (965-kilometer) Malacca Strait and home to one of the world’s busiest container ports, Singapore has remained vulnerable to fluctuations in overseas demand for manufactured goods. The government has boosted the financial services and tourism industries to become less reliant on exports.
Singapore’s unemployment rate was 1.9 percent in the first quarter. Wages will grow at a faster pace in 2013, the central bank said in April.
The monetary authority in April stuck to a policy of allowing gradual gains in its currency. The central bank uses the exchange rate rather than borrowing costs to conduct monetary policy, adjusting the pace of appreciation or depreciation against an undisclosed trade-weighted basket of currencies by changing the slope, width and center of the band. A flatter slope allows slower appreciation or depreciation over time.
“Going into the second half of the year, we should continue to see steady and gradual improvement in the services sector,” Irvin Seah, a Singapore-based economist at DBS Group Holdings Ltd., said before the report. “The risk on inflation and growth remains very well-balanced. There’s little incentive for the MAS to deviate from the current monetary policy.”
Manufacturing (SIIPYOY%) grew 1.1 percent from a year earlier in the three months ended June 30, and 37.6 percent from the previous quarter. The services industry rose 5 percent last quarter from a year earlier, while construction expanded 5.6 percent.
Today’s figures are computed largely from data in the first two months of the quarter, and revised numbers will be released next month. The GDP data may be “revised considerably lower,” said Wai Ho Leong, an economist at Barclays, citing the impact of country’s worst smog in June and a sell-off in financial markets.
Forest fires raging on the neighboring Indonesian island sent Singapore’s Pollutant Standards Index to a record 401 on June 21, a level deemed hazardous. The haze forced some tourist attractions to shut, and may have prompted more visitors to reconsider trips to the city state while residents reduced outdoor activities. Tourism-related industries in Singapore make up as much as 6 percent of the economy.
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