Singapore's growth 9.4 percent but PM sees no overheating
SINGAPORE (AFP) — Singapore's economy powered to 9.4 percent growth in the third quarter, the government said Wednesday, as the city-state moved to control inflation and the prime minister dismissed claims of overheating.
Singapore, one of Asia's wealthiest economies, was on track to meet the government's full-year growth target following its performance over the three months to September compared with a year earlier, the trade ministry said.
During the second quarter Singapore's gross domestic product (GDP) expanded a revised 8.7 percent, it said.
The data came as the Singapore dollar traded at 10-year highs against the greenback after the central bank signalled a slight tightening of its policy in the face of rising inflation, dealers said.
The bank targets the exchange rate rather than interest rates to control inflation. A stronger local currency makes imports cheaper, helping to control the rise in consumer prices.
In August the government raised its full-year growth target to between 7.0 and 8.0 percent but analysts said Wednesday that 2007 growth could be even better than that.
"I don't think the economy as a whole is overheating," Prime Minister Lee Hsien Loong was quoted as saying in the Today newspaper while on a visit to Hungary.
"It's a good figure, but at the same time, inflation is well under control," Lee said of this year's growth target.
The Monetary Authority of Singapore (MAS), the de facto central bank, said inflationary pressures had picked up, with rents and wages increasing amid buoyant domestic economic conditions and rising global oil and food prices.
Full-year inflation is now projected to reach between 1.5 and 2.0 percent, up from the 0.5-1.5 percent expected when the bank issued its last policy review in April, MAS said.
For next year, headline inflation is seen rising initially to about 3.5 percent before easing to between two and three percent for all of 2008, MAS said.
Against this backdrop, MAS said it will continue to seek "a modest and gradual appreciation" of the local dollar.
"In our assessment, this policy stance will remain supportive of economic growth while capping inflationary pressures and ensuring price stability over the medium term," MAS said.
In late afternoon trade the Singapore dollar was at 1.4653 to the US dollar, pulling back from the 10-year high of 1.4618 reached earlier Wednesday but up from 1.4752 on Tuesday.
After years in the doldrums, Singapore is experiencing a property boom which has sparked dramatic increases in rents this year.
Song Seng Wun, regional economist at CIMB-GK securities, said on local radio that while some sectors, especially property, were "warming up very nicely," the economy was not overheating.
He noted that the pharmaceuticals sector was growing faster, as was construction. But he said construction was expanding from a relatively low base.
"I don't think (the) economy at this point is showing signs of overheating," Song said.
The trade ministry said third-quarter growth in the manufacturing sector reached an estimated 12.3 percent, up from 8.3 percent in the preceding quarter, helped by the biomedical sector and transport engineering which includes oil rigs and ships.
Growth in the construction sector was estimated at 15.5 percent compared with 18.8 percent last quarter, while the services sector expanded an estimated 8.1 percent, against 8.4 percent in the second quarter, the ministry said.
On a quarter-on-quarter seasonally adjusted annualised basis, real GDP growth slowed to 6.4 percent from 14.4 percent in the second quarter, the trade ministry said.
"The Singapore economy continued to register strong growth in the third quarter of 2007," it said in a statement, adding the economy "is well on track" to meet full-year growth targets.
"It's still a solid growth," said Action Economics chief economist David Cohen.
The positive data helped push the Straits Times Index to a fresh intra-day high of 3,906.16 but profit-taking ate into the gains and it closed closed down 51.3 points at 3,814.45.
