Page last updated at 07:27 GMT, Tuesday, 14 July 2009 08:27 UK

Singapore's economy bounces back

Singapore's economy recovers

Singapore appears to be emerging from its worst recession on record after the economy expanded at an annualised rate of 20.4% between April and June.

The rapid expansion compares with a revised contraction of 12.7% in the first quarter from January to March.

It was the first quarterly expansion in a year, lifted by increased drug sales and construction activity, said the Ministry of Trade and Industry.

However, the government still expects the economy to contract for the year.

The government now predicts the economy will decline between 4% and 6% for 2009 as a whole, less than its earlier estimate of a contraction of between 6% and 9%.

Compared with the second quarter last year, the economy contracted 3.7% between April and June, a slowdown on the 9.7% year-on-year drop in the first quarter.

Cautious

Despite the sharp economic expansion in the second quarter, the government said it remained cautious because the global economy was still fragile.

VIEW FROM SINGAPORE
Mariko Oi
Mariko Oi, reporter, BBC Asia Business Report

There was a big sigh of relief for many Singaporeans as the economy expanded in the second quarter at its fastest rate in nearly 6 years.

Growth surpassed expectations, with a more than 20% rise from the previous quarter. All thanks to a surge in biomedical production.

Manufacturing is not exactly a huge part of Singapore's economy, but the island specialises in pharmaceuticals and high-end specialist manufacturing.

And increased demand for flu vaccines helped an already recession-proof sector to expand.

Exports, which are the real lifeblood of Singapore's economy, rose nearly 6% in May.

Shipments of raw materials such as iron ore are picking up. The reason, yet again, appears to be China.

The rest of the manufacturing sector is still struggling, however, and retail sales are still down. Domestic consumption is not picking up, so analysts say the worst may not be over yet.

The Ministry of Trade and Industry said the economic growth between April and June "may not be sustained".

Mariko Oi, from the BBC's Asia Business Report, said many Singaporeans would breathe "a big sigh of relief" following the latest figures.

Manufacturing isn't exactly a huge part of Singapore's economy, but the island specialises in pharmaceuticals and high-end specialist manufacturing," she said.

"And increased demand for flu vaccines helped an already recession-proof sector to expand.

"The rest of the manufacturing sector is still struggling and retail sales are still down, however. So analysts say the worst may not be over yet," our correspondent added.

Analyst David Cohen, of research group Action Economics, said he now expected other East Asian nations to also release upbeat economic figures for April to June.

"Maybe this will provide some reassurance to the markets, which have been jittery in the last few weeks about the sustainability of the recovery," he said.

"It shows that Asian economies have turned the corner in the second quarter."



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