* Q4 GDP beats expectations, improves outlook for 2013
* Biomed make bigger contribution than electronics for 1st
* Downside risk for global economy recede
(Adds comments on biomed, forecasts for 2013)
By Kevin Lim
SINGAPORE, Feb 22 Singapore's economic outlook
brightened after fourth quarter growth was revised up
substantially, with its young biomedicals sector contributing
more to the economy than the electronics sector for the first
Singapore's GDP expanded at an annualised rate of 3.3
percent in the fourth quarter from the preceding three months,
turning around from the 4.6 percent contraction in the third
quarter, according to revised seasonally adjusted data released
by the Ministry of Trade and Industry on Friday.
The government declared it was cautiously positive on the
outlook for the city state, a major Asian business and financial
centre, which has been grappling with slowing growth amid a
sharp downturn in demand for its exports.
Its electronics sector, which has long been the mainstay of
its manufacturing industry, has struggled in recent quarters due
to depressed overseas demand.
The fourth quarter growth beat the 2.1 percent median
forecast of economists polled by Reuters and was higher than the
advance estimate of 1.8 percent.
Banks such as ANZ and DBS Group expect Singapore's 2013
growth to come in at the top end or exceed the government's 1-3
percent growth forecast, underpinned by improving global
DBS economist Irvin Seah said the better-than-expected
fourth quarter "marks the turnaround in the growth trajectory
from the bottom registered in third quarter 2012".
Leif Lybecker Eskesen, chief economist at HSBC for India &
ASEAN, was more guarded about the outlook due to the uncertain
"The high-beta economy remains very much at the whim of the
global economy, which is still not in tip-top shape,
notwithstanding the signs of stabilization we have seen in
recent months," he said.
The Singapore dollar rose slightly on the
stronger-than-expected data, and was recently at 1.2377 to its
U.S. counterpart by 0645 GMT, compared with 1.2420 before the
DBS's Seah said that although the electronics sector will
probably remain sluggish in coming months, pharmaceutical and
transport engineering segments will lead an improvement in
manufacturing. He expects the Singapore economy will grow by
3.2 percent this year.
"The return in investor confidence as well as stronger
intra-regional trade will provide the necessary impetus for
growth in (services) in the coming quarters," he added.
Manufacturing grew 1.9 percent, after shrinking 13.6 percent
contraction in the third quarter, while services expanded 2.5
percent following the growth of 0.4 percent in the preceding
For the whole of 2012, Singapore's economy expanded by 1.3
percent, down from a revised 5.2 percent in 2011.
Ow Foong Pheng, permanent secretary at the Ministry of Trade
and Industry (MTI), told reporters the economy ended the year on
a firmer footing and that the "key downside risks" for the
global economy have receded.
Singapore's relatively young biomedical sector provided the
highlight in the latest data. The sector's share of GDP exceeded
electronics for a first time last year. Pharmaceuticals and
medical devices expanded 9.9 percent and accounted for 25.5
percent of manufacturing GDP, above electronics' share of 25.0
Singapore's manufacturing and exports data are already very
volatile due to pharmaceuticals, which are produced in batches
and can vary sharply from month to month.
HSBC's Eskesen cautioned against reading too much into the
pharmaceutical sector growth.
"While final GDP were revised up for the quarter and
significantly, this to a large extent was driven by the volatile
pharmaceutical sector and is, therefore, not an indication of a
changing trend," he said.
Singapore made an aggressive push into biomedicals around 15
years ago, offering generous tax breaks to attract manufacturing
investments in pharmaceuticals and providing millions of dollars
in funding to get top scientists such as Alan Colman, who
famously cloned "Dolly" the sheep, to relocate to Singapore.
ANZ bank economist Vincent Conti said electronics could
regain its top position this year.
"Once the global demand situation begins to improve,
Singapore's electronics sector will surge and make up the loss
in share that happened last year," he said, adding the
biomedical sector could see some destocking in the near term.
The Economic Development Board (EDB), Singapore's main
development agency, remains bullish about the electronics
EDB's deputy director for electronics Terence Gan told
Reuters in a recent interview that companies such as
Globalfoundries, STATS ChipPAC and Hoya
upgraded or expanded their operations in Singapore in
He said the electronics "industry has the ability to ride on
the global economic recovery when it happens."
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($1 = 1.2393 Singapore dollars)
(Editing by Shri Navaratnam and John O'Callaghan)