Singapore aims for recovery

Traders were not impressed

Singapore's economy shrunk by an estimated 2.6% in the first three months of the year compared with a year earlier, official figures have revealed.

Despite the contraction, some economists said the country's economy was gradually moving out of its worst recession in 30 years.

But equity investors were spooked by the estimate because they had expected a stronger performance, and this sent shares lower.

"This is below the market forecast for a 2% decline," acknowledged DBS Bank economist Kaan Quan Hon.

"However, the recovery is on track and will gather steam ahead," he predicted.

Gaining strength

The 2.6% fall in gross domestic product (GDP) was the best performance seen in Singapore in a year, and much better than the last three months of 2001 when GDP fell 6.6%.

During 2001, the economy shrank 2.2% after having expanded by 9.9% in 2000.

Singapore blamed weak global demand for electronic goods for the economy's weakness.

Electronic goods account for about 60% of the country's non-oil exports.

Singapore's export reliant manufacturing sector suffered a 6.1% fall in output during the first three months of this year.

The service sector performed much better with a fall in output of just 0.7%.

Negative markets

Investors, who had already priced in a recovery for Singapore, were disappointed with the figures and share prices fell when the numbers were released.

"I think the economy is not staging a strong recovery," IDEAglobal economist Paul Shymyck said, contradicting the view held by more optimistic economists.

"The performance was helped by the pharmaceutical industry which is very volatile, rather than the electronics industry," he said.