Singapore saw its fastest economic growth in six years in the second quarter of 2009, latest government data has shown, raising hopes that the city-state's worst-ever recession may be bottoming out.
According to figures released on Tuesday, gross domestic product rose at an annualised, seasonally adjusted rate of 20.4 per cent.
The rise came largely from a surge in output in the pharmaceutical sector and a boom in construction.
As a result the government announced it was trimming its forecast for 2009 as a whole, projecting that Singapore's economy would contract between four and six per cent rather than a previous forecast of six to nine per cent.
Year–on-year, Singapore's GDP in the second quarter fell 3.7 per cent from the same period in 2008, after a 9.6 per cent year-on-year drop in the first quarter.
Singapore's economy relies heavily on exports, finance and tourism and had been hit hard by the global trade slowdown.
The economy reached its lowest point in the last quarter of 2008, which saw an annualised drop of 16.4 per cent – the worst performance since Singapore became an independent state in 1965.
Uncertainty remains
 |
| Singapore's economy relies on exports and has been hit hard by the global slowdown [EPA] |
But economists were cautious about the sustainability of any recovery, given that second-quarter growth was driven by the pharmaceuticals industry, known to be fickle as well as the outlook for demand in Western markets remaining uncertain.
"This will be the first of a number of GDP reports that will show Asia is recovering after a weak first quarter," David Cohen of Action Economics in Singapore, told Reuters news agency.
But he added: "There is still a lot of uncertainty clouding the global outlook. The unemployment rate around the world is still edging higher, and the market is still nervous about how much momentum the recovery has."
Analysts have also said the stronger performance might give a short-term boost to the Singapore's dollar and the stock market, but it would not change the central bank's stance on the currency - its main monetary policy tool.
"On monetary policy, we might not see any change, because right now it is at the level where [the central bank] can keep exports competitive," Chow Penn Nee, an economist, told Reuters.
The Monetary Authority of Singapore, the country's central bank, manages the currency against a secret basket of trade-weighted currencies and in April shifted the midpoint of this band lower.
It next reviews policy in October.