SG 2009 GDP forecast -2.5 to -2.0%

Announced on 12 Oct 09, MTI has upgraded our country’s economic growth forecast to -2.5 to -2.0%. This compares with Q2 revision of -6.0 to -4.0% and earlier Q1 estimate of contraction by 6.0 – 9.0%.

The stock market has reacted positively to the news, and the papers all write about signs and symptoms of recession ending.

Quarter on quarter, almost all industry sectors performed well coming off from a low base this year. Yet it is also evident in the MTI release that restocking activity from past aggressive cost cutting and government stimulus programmes are still required to push any growth ahead, while private sector demand builds up in time to come (hopefully sooner than later). Thankfully, the Jobs Credit Scheme has been extended for a period of 6 months (though expected) to buy time for our SMEs on the path to recovery.

How will the developed economies (and the rest of the world) ride out the road to recovery and eventually phase out the waterfall of economic stimuli? Perhaps there is some truth in this article by Andy Xie (former Morgan Stanley chief Asia-Pacific economist) as central banks grapple with interest rate adjustments, currency devaluation and dynamic policymaking.