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THE economic outlook for the year is looking a bit like a ride on a roller coaster - a lot of ups and downs with the view changing all the time.
This is partly reflected in a new Monetary Authority of Singapore (MAS) poll, which has tipped the economy to move along at a reduced pace compared with last year but pick up towards Christmas.
The optimism is due partly to the belief that the spillover from the boom in India and China will offset a slowdown in the United States and partly to a view that inflation will be easing.
Dr Chua Hak Bin, chief Asian strategist at Deutsche Bank Private Wealth Management, said a visible slowdown in the second and third quarters seems to be on the cards, with an improvement by the end of the year.
'I am forecasting about 5.1 per cent growth for the second quarter, 4.8 per cent for the third and 5.6 per cent in the fourth.
'The latest survey suggests that Singapore's economy remains resilient despite a US downturn. Strong growth in emerging economies like China and India is partly compensating for slower growth in the US.'
United Overseas Bank economist Ng Shing Yi said inflation should have peaked last month or this month, and is likely to moderate in the second half due to stabilising oil prices.
MAS polled 21 economists and analysts for its June survey released yesterday. The key finding was that economic growth for the year has been forecast to come in at 5.5 per cent, down a touch from the 5.6 per cent forecast in the March survey.
The experts expect lower- than-expected growth in construction, financial services and wholesale and retail trade to hinder expansion.
In particular, expectations for the construction sector were dialled down from March's projection of 15.9 per cent to 11.7 per cent, while wholesale and retail trade is forecast to slow to 5.2 per cent from 6.3 per cent.
But while inflation risks continue to escalate, the experts said strong growth in China and India will help cushion the impact of a flagging US economy.
The amended forecast of 5.5 per cent is within the 4 to 6 per cent range of growth that the Government predicted earlier.
The MAS said the most likely outcome is for growth of between 5 per cent and 5.9 per cent this year, based on mean probability distribution of the survey.
What yesterday's figures also reveal is how difficult it is to get a handle on things in this year of sub-prime crisis, credit crunch, oil shocks and periods of near financial market panic.
This is evident in the first-quarter growth number. The experts had tipped in March that it would be 5.7 per cent but the MAS said yesterday the economy actually expanded by 6.7 per cent in the period.
That healthy number prompted analysts in the June poll to adjust their forecast for second- quarter growth to 4.7 per cent, up from 4.4 per cent in the March survey.
HSBC Bank economist Robert Prior-Wandesforde said the upward revision in second-quarter forecasts reflects the unexpected strength of first-quarter data.
He believed that there remained potential upside surprises for both growth and inflation; he tips 6 per cent annual growth and at least 6.3 per cent inflation.
'If I'm right, then the pressure will remain on the MAS to keep a tight currency stance at its October meeting,' he said.
Inflation is a key concern. The MAS said the median forecast rose to 6 per cent from 5 per cent in March. Inflation in the second quarter is tipped at 7.5 per cent.
nicholas@sph.com.sg
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