CORRECTED-UPDATE 1-Singapore Q1 growth tops market, rebasing hurts annual numbers

Mon May 19, 2014 9:50pm EDT

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(Corrects manufacturing output rise in fourth bullet)

* Q1 GDP annualised +2.3 pct q/q vs +1.0 pct f'cast

* Q1 GDP +4.9 pct y/y vs 5.5 pct f'cast

* Singapore changes base year to 2010 instead of 2005

* Manufacturing sector up 11.9 pct q/q

By Jongwoo Cheon

SINGAPORE, May 20 (Reuters) - Singapore's economy grew faster than initially estimated in the first quarter, handily beating expectations, with solid manufacturing activity and a recovery in developed markets set to underpin growth over the year.

The latest numbers released on Tuesday by the Ministry of Trade and Industry were complied after rebasing effects, with the base year for the national accounts now set to 2010 instead of 2005.

The data showed the trade-dependent economy expanded an annualised and seasonally adjusted 2.3 percent in the January-March period from the previous three months.

That compared with a 1.0 percent growth forecast in a Reuters poll and the government's earlier estimate of a 0.1 percent expansion.

"I don't think there would be any change in policy stance due to this, the economy is pretty much in a healthy shape," said DBS senior economist Irvin Seah.

In April the central bank stuck to its tight monetary policy stance, saying core inflation will remain elevated as a sustained recovery in advanced economies supports growth.

"The year-on-year number surprisingly came down, that comes on the back of a massive revision in last year's figures, which saw every single figure adjusted."

On a year-on-year basis, the economy grew 4.9 percent in the first quarter, missing a market forecast of a 5.5 percent forecast in a Reuters poll. In April, the government had estimated the first quarter annual growth at 5.1 percent.

The rebasing also counts research and development expenditure as investment in the data, which the government said will raise the level of nominal gross domestic product.

The first quarter growth was boosted by solid performance in the manufacturing sector, helped by recovery in global demand.

The sector saw annualised quarter-on-quarter growth of 11.9 percent, while year-on-year growth accelerated to a 9.8 percent, from a 7.0 percent rise in the previous period.

Despite signs of a pick up in global demand, and expectations it will hold up Singapore's economy, some analysts raised worries about the financial sector.

"Manufacturing will benefit little bit from a global recovery story," said Selena Ling, head of treasury research at Oversea-Chinese Banking Corp.

"We may see momentum slowing in the financial sector. If we get bearish news like Fed rate hike expectations, we are going to see EM and Singapore being impacted," said Ling adding growth may slow down in the coming quarters.

The finance and insurance sector grew 3.5 percent in the first quarter from the previous quarter. That compared with a 26.0 percent growth in the fourth quarter

Singapore's economy has been growing at a steady pace in recent quarters on solid manufacturing output with a pick-up in demand from developed economies such as the United States. Service sectors including finance have also propped up the wealthy Southeast Asian country.

In April Singapore's non-oil domestic exports rose more than expected, but some economists maintained a cautious view on overseas shipments, given sustained weakness in the electronics sector which is a key link in the global supply chain.

Last year, the manufacturing sector made up roughly 19 percent of the local economy. The electronics sector accounts for 30 percent of total manufacturing activity.

Over the course of 2014, the Singapore economy is seen benefiting from an expected pickup in U.S. and European growth, even though a slowdown in the Chinese economy poses downside risks for growth in the city-state.

The government expects Singapore's economy to grow 2-4 percent in 2014, and economists generally tip full-year growth to come in near the upper end of that official forecast.

The median forecast among 22 economists surveyed by the Monetary Authority of Singapore was for the city-state's gross domestic product to expand 3.8 percent in 2014, the Monetary Authority of Singapore said in March. (Additional reporting by Masayuki Kitano and Rachel Armstrong; Editing by Shri Navaratnam)

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