InterAksyon.com means BUSINESS
SINGAPORE - Singapore avoided recession in the first quarter, analysts said, as data released Friday showed the economy grew an annualized 9.9 percent, rebounding from a slump in the previous three months.
At the same time, the central bank said it would tighten monetary policy after warning inflation would grow by more than expected this year.
The trade ministry said the strong 9.9 percent quarter-on-quarter rise in gross domestic product for January-March was driven by a turnaround in the manufacturing industry and reversed the 2.5 percent fall in the final quarter of 2011.
It was also much better than the 6.3 percent forecast by economists in a Dow Jones Newswires poll.
Justin Harper, market strategist at IG Markets Singapore, said: "Singapore's economy grew almost 10 percent last quarter avoiding recession and easing fears that it wasn't resilient enough to weather the global economic slowdown."
When the economy shrank in the December quarter, analysts highlighted the prospect of a technical recession -- two consecutive quarters of contraction -- as the 2012 global outlook was then murky due to the eurozone debt crisis.
On a year-on-year basis, the economy grew 1.6 percent in the first quarter, the trade ministry said, adding that while that figure was "modest" it still showed momentum had picked up.
The government has said it expects the economy to grow 1.0-3.0 percent in 2012, well down from the 4.9 percent posted last year.
The figures were lifted by the manufacturing sector, a key pillar of the trade-driven economy, which grew 14.7 percent, after a decline of 11.1 percent in October-December, the ministry said.
"This turnaround was supported by higher levels of output in the electronics and precision engineering clusters compared to the preceding quarter," it added.
The construction sector surged almost 25 percent on a quarterly basis after sinking 2.2 percent in the previous three-month period.
Meanwhile, the Monetary Authority of Singapore also said Friday it has decided to tighten monetary policy.
The move came as the MAS said it had raised its inflation outlook for this year to 3.5-4.5 percent from 2.5-3.5 percent previously.
It said the slope of its policy band for the local dollar would be "increased slightly".
Singapore conducts its monetary policy via the local dollar instead of interest rates because of the economy's huge reliance on external demand.
A steeper slope for the Singapore dollar means it would be allowed to appreciate to ease the effects of imported inflation.
"This policy stance will help anchor inflation expectations, ensure medium-term price stability, and keep growth on a sustainable path," the MAS said in its twice-yearly policy statement.
The Singapore dollar is traded against a basket of currencies of its major trading partners within an undisclosed trading band known as the nominal effective exchange rate.
Details of the trading band are not made public to prevent speculation on the Singapore dollar.
InterAksyon.com means BUSINESS