Singapore said on Tuesday its economy grew for the first time in a year in the second quarter, suggesting the city is emerging from its worst recession and offering hope for other battered Asian economies.
Powered by electronics and biomedical exports, the economy soared 20.4 per cent in the three months to June compared with the first quarter on a seasonally adjusted annualised basis, the Ministry of Trade and Industry said.
A Dow Jones Newswires poll of 10 analysts had tipped an average 14.1 per cent economic expansion. It was the first quarter-on-quarter growth in five quarters.
Gross domestic product (GDP) is now expected to contract 4-6 per cent for the year, better than an earlier projection of 6-9 per cent, but the ministry warned that any recovery would be weak due to the fragile global economy.
Trade-driven Singapore last sank into a recession in 2001 when the economy shrank 2.4 per cent, its worst slump since gaining statehood in 1965.
It became the first Asian economy to slip into recession in the second half of last year after a financial and economic crisis that started in the United States hit demand for its exports.
Tuesday's data meant that Singapore is the first of the Asian countries hit by recession to release statistics pointing to a recovery.
Compared with the previous year, however, output in the June quarter was down 3.7 per cent, indicating that the economy remained weak.
"I guess technically the recession would have ended, the economy is growing again," said David Cohen, an economist with research house Action Economics.
"Growth won't be very strong but it should remain in an upward trajectory," he told AFP. DBS Group called it a "stunning turnaround" in line with its forecast.
CIMB-GK economist Song Seng Wun said Singapore's June quarter rebound boosts hopes that the worst is also over for China, South Korea, Hong Kong, Taiwan and other Asian economies affected by the global crisis.
"Because Singapore has an open economy and has the highest exports to GDP ratio, its performance reflects any improvement or deterioration in global demand," Song said.
Despite the quarter-on-quarter growth, the trade ministry cautioned that "the outlook for the rest of the year remains largely unchanged: of a weak recovery susceptible to downside risks."
"At this juncture, there is no evidence yet of a decisive improvement in final demand," the ministry said, adding the second quarter surge "may not be sustained."
The key manufacturing sector contracted by 1.5 per cent in the June quarter, compared with a 24.3 per cent shrinkage in the previous three months, reflecting the spike in pharmaceuticals and electronics, the ministry said.
But the services sector, which accounts for two-thirds of the economy, continued to shrink with a decline of 5.1 per cent in the June quarter from a year ago, it said.
It noted that rising unemployment and reduced consumer spending in major export markets such as the United States and Europe reflected the continued weakness in the global economy.
The June quarter figures are computed mainly from the April-May period and the ministry is expected to release a more detailed picture in the next few weeks.
Action Economics' Cohen predicted that "this will be the first in a series of upbeat GDP reports for the second quarter from Asian economies." "Maybe this will provide some reassurance to the markets which have been jittery in the last few weeks about the sustainability of the recovery. It shows that Asian economies have turned the corner in the second quarter."