THE earlier-than-expected bounce in the manufacturing sector may have given Singapore's economy a much-needed boost in the second quarter of this year. Most of the eight economists polled by The Straits Times are predicting that higher factory output spurred the economy to grow by double digits between March and last month - the first quarter-on-quarter expansion in four quarters.

RELATED LINKS  Q2 GDP FORECAST

But in year-on-year terms, which compares the second quarter of this year to the second quarter of last year, growth would still be negative as the economy remains weaker now than last year.

Still, the strong rally expected in the second quarter has led economists to keep a close eye on their growth forecasts for the full year. The Government's official estimates on how the economy did in the second quarter are due this month, and the final figures will be out next month.

But at least one economist is so confident of a sharp rebound in the second quarter that he is already raising his full-year growth forecast ahead of the official data.

Citigroup's Kit Wei Zheng believes the economy will expand by an astonishing 22.8 per cent in the second quarter over the first quarter, reversing the 14.6 per cent quarterly contraction in the first quarter. Based on this, he is predicting that the economy will shrink only 2.7 per cent for the whole year, compared to the 5 per cent decline he tipped earlier.

This is a far more optimistic view than the official forecast from the Ministry of Trade and Industry (MTI), which is predicting that the economy will shrink by 6 per cent to 9 per cent this year.

The MTI's forecast was released before figures that showed the manufacturing sector started to grow again in April and May, with growth expected to continue last month.

Although the sector's growth so far has been due mainly to a spike in drugs output, the electronics segment has also recently shown signs of turning the corner, said DBS economist Irvin Seah. 'In fact, across the board, all segments of manufacturing are clearly off the bottoms we saw in January and February.'

Mr Kit believes that because Singapore's economy is so open to external forces, it will benefit more than other countries from improvements in the American and Chinese economies. This means a gradual recovery in trade-related services as trade slowly picks up, as well as improvements in the tourism and retail industries.

Property sales and construction should also continue to grow, which may offset a slowdown in manufacturing growth after the second quarter, he said. Another positive sign emerging in the second quarter is fewer layoffs, said Mr Leong. Better-than-expected job numbers could set the stage for a swifter recovery when it starts.

Please read the full story in Tuesday's edition of The Straits Times

fiochan@sph.com.sg