Singapore says economy to grow up to 6.5% this year

The government upgraded its growth forecast from 3.0-5.0 percent to 4.5-6.5 percent after the economy contracted by a slower-than-predicted 2.0 percent in 2009 due to a faster turnaround from recession.

Gross domestic product (GDP) rose 4.0 percent year-on-year in the fourth quarter to December, faster than the 0.6 percent expansion in the third quarter, the Ministry of Trade and Industry said.

“Major economies around the world have emerged from recession. Financial markets have stabilized and trade flows and industrial production have also picked up strongly,” the ministry said in a statement.

Singapore, one of Asia's wealthiest countries, relies on trade, finance and tourism to drive economic growth.

Trade promotion body International Enterprise Singapore said the nation's main exports, among them pharmaceuticals and computer chips, should expand 10-12 percent this year after declining 10.6 percent in 2009.

After shrinking 19 percent to US$747 billion (US$529 billion) in 2009, total trade is also forecast to jump 9-11 percent this year, driven by a rise in global demand, IE Singapore said.

The trade ministry however said there are uncertainties in the economic outlook, especially in the second half of the year with the recovery in the United States (U.S.), Europe and Japan expected to be sluggish.

“In addition, several downside risks remain, including sovereign debt risks (especially in Europe) and asset price inflation in Asia,” it said. “These factors could weigh on the pace of growth in major economies, especially in the later part of 2010.”

David Cohen, a regional economist with consultancy Action Economics, acknowledged there are potential minefields but said growth will continue.

“There are still risks surrounding another possible financial crisis of some sort,” he told AFP, citing fears the debt crisis in Greece could spread to the rest of the countries using the euro single currency.

“But I still think the most likely scenario would be continued growth. The data out of the United States indicate that recovery is continuing there. The Asian region, in particular China, should continue to pace global growth”.

Singapore slipped into recession in the third quarter of 2008 after being hammered by the global economic crisis that followed the collapse of U.S. investment bank Lehman Brothers.

There had been fears the economy in 2009 would post its worst contraction since independence more than 40 years ago. But the recovery was faster than many had predicted and Singapore declared the recession over in November last year.

Singapore's worst recession since gaining independence in 1965 took place in 2001 when GDP shrank 2.4 percent due to bursting of the technology bubble.

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