Factories to give economy a boost

Workers at Add-Plus, an electronics manufacturing company that makes printed circuit boards. -- PHOTO: ST FILE
Workers at Add-Plus, an electronics manufacturing company that makes printed circuit boards. -- PHOTO: ST FILE

Experts raise sector's growth forecast to 5.6%, expect low unemployment

The brighter global economic outlook is giving Singapore's factories a boost and prompting more optimism about the Republic's growth prospects among private sector economists.

The economy should also continue to see low unemployment, a poll of 26 private sector economists by the Monetary Authority of Singapore showed yesterday.

Growth is expected to come in at 3.8 per cent for the full year, which is at the higher end of the official forecast of 2 per cent to 4 per cent.

While the full-year estimate was unchanged from a similar survey released in March, economists now believe that manufacturing will shoulder a bigger burden of growth.

The sector, which makes up a fifth of Singapore's economy, is expected to grow 5.6 per cent this year, according to those polled.

This is up from their estimate of 5 per cent in March's survey, and significantly higher than last year's sluggish 1.7 per cent expansion.

"Industrialists are starting to feel the impact of new orders from the United States, Japan and the European Union, as well as the rest of Asia," said Barclays economist Leong Wai Ho.

UOB economist Francis Tan said that Europe's expansionary policies could lead to stronger demand for Singapore's exports.

"The euro zone's recent expansionary measures might boost credit growth and hopefully prompt companies to invest and import more, which will be a boost to our exports," he said. "Consumer and business confidence in the US is also improving."

The better performance from manufacturing has prompted analysts to upgrade their economic growth forecast for the second quarter to 3.3 per cent, up from 3 per cent in March's survey.

The Trade and Industry Ministry reported that the economy grew 4.9 per cent in the first three months of the year.

But services, the biggest sector in the economy, could disappoint.

The finance and insurance segment was one of the main drivers behind the service sector's strong 5.3 per cent growth last year.

But government measures to curb excessive borrowing have since had an impact on the quantity of loans disbursed by financial institutions, said UOB's Mr Tan.

Recent events, such as political upheaval in Thailand and the mysterious disappearance of Malaysia Airlines Flight MH370, might also drag down tourism arrivals to Singapore and the region, said CIMB economist Song Seng Wun.

That means the accommodation and food services sector is expected to grow at a slower 2.1 per cent, down from the 2.8 per cent estimated earlier by economists.

Consumer prices are likely to go up 2.2 per cent this year, slower than an earlier estimate of 2.8 per cent, partly due to accommodation costs easing amid a softening housing rental market.

Economists also expect unemployment to stay at 1.9 per cent.

chiaym@sph.com.sg

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