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Published June 10, 2009
The 2010 growth story comes with an asterisk*
*Forecasts point to GDP growth but the base is low and there's uncertainty about 2009
By TEH SHI NING
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(SINGAPORE) Widespread positive forecasts for 2010's GDP growth all point to certain economic expansion here. A brief survey of 10 research houses' forecasts places next year's GDP figure in a range of 2.4 to 6.2 per cent growth.
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But economists say that next year's light still shines through a fog of factors such as uncertainty over the strength of global demand's rebound, and the inherent bias of comparisons to this year's low output.
Citi economist Kit Wei Zheng said: 'While the headline forecast for next year looks bullish, a lot of that is exaggerated by technical factors as well.' He expects quarter-on-quarter growth to taper off next year, but says that the favourable base effect and the upward trajectory set in motion by strong industrial production figures in April, should lift 2010's year-on-year numbers.
Citi's forecasted GDP growth next year is the highest of the ten - a 6.2 per cent expansion. Its forecast for 2009 was also recently upgraded to smaller contraction of 5 per cent.
Indeed, with 2010 projections pencilled in positive territory, more seem to be focused on adjusting 2009 forecasts as the release of more real data clarifies the economy's likely performance for the full year.
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Exact forecasts may mean little to the man-on-the-street, but remain crucial to analysts whose number crunching often requires the input of a precise summary of the macroeconomic outlook. And while many are 'scrambling over 2009's numbers' as one observer put it, most seem to feel that 2010's figure can be safely left unchanged for now.
For instance, OCBC may revise its 2009 forecast upwards from minus 7.6 to minus 5.4 per cent, if May's industrial production numbers affirm a return of demand, economist Selena Ling said. But, its forecast for 2010 will remain at positive 2.4 per cent.
'We haven't seen a sharp enough pick-up to revise that upwards yet. There have been more green shoots, but the jury is still out about whether there will be a major US recovery that will substantially lift Singapore's economy too,' she said, cautioning that improvement has yet to be seen with non-oil domestic exports.
Action Economics director David Cohen, too is unlikely to alter his 2010 forecast for now. 'A lot of the trajectory has already been set in place for this year, but, the direction of the economy in 2010 hinges a lot on what happens towards the end of this year,' he said.
One of the few to stick by its forecasts since February, Barclays Capital expects a 4 per cent growth next year to follow a 4 per cent contraction this year.
'We are quite happy with our forecasts, which appear to be tracking regional growth proxies quite well. The green shoots spotted in February in the region have not wilted away,' said Barclays' economist Leong Wai Ho.
'We think that there is still possible upside to this year's forecast, and given the leveraged nature of Singapore's growth to global growth and financial conditions, we could see potential upside to our 2010 forecast as well.'
However, unexpected events leading to a 'double dip' or a 'relapse' are some of the potential triggers of downward revision to 2010's positive forecasts, the economists say.
Standard Chartered's economist Alvin Liew said that a sudden, accelerated spread of H1N1 flu globally accompanied by a surge in fatalities, though unlikely for now, could be one such trigger.
Stanchart is one of the few to revise its 2010 forecast upwards to 4.4 per cent from 2 per cent, while maintaining its 2009's forecast at minus 7.5 per cent.
'What I think we can take away from the last few months is that we've probably seen the worst in the current recession, but it's hardly time to celebrate as a lot of the key data are still in decline, albeit less negative, such as exports and retail sales,' said Mr Liew.
Noting that current growth projection suggests that the absolute level of economic activity may not return to 'pre-Lehman levels' until late 2010 or early 2011, Mr Liew said: 'A gradual non-inflationary recovery is the main outlook for next year.'