4 big reasons why Singapore will have a stronger second-half GDP

DBS economist identifies the country's catalysts.

According to UOB economist Francis Tan’s views on the outlook of Singapore's GDP growth for the second half of this year, based on Prime Minister Lee Hsien Loong's National Day Message, Singapore will have a stronger 2H GDP since 2H 2012 was quite a low base half year.

Also, the cyclical rebound in electronics manufacturing will allow for stronger 2H numbers coming from overall manufacturing, said Tan.

The services sector will continue to add strongly to overall growth, the UOB economist reckons, and that the weaker SGD will be a boon to exporters with the forecast of the USD-SGD exchange rate to hit a year-end 1.30.

Tan's comments came after PM's message that GDP grew 2% y/y in 1H 2013. "This means that 2Q GDP grew 3.8% y/y. (above our expectations actually)," he said.

"As manufacturing likely only grew 0.22% y/y in 2Q (smaller than advance estimates of 1.1%), this implies that the bulk of the positive growth surprise came from the Services sector," he added.

"I am postulating that Wholesale & Retail trade contributed quite alot to that. This is because the growth coming from Non oil Re Exports was pretty strong in 2Q (although NODX did not do that well). With good growth coming from the trade front, I can also see upside coming from Transport and Storage; while the other sectors such as Finance & Insurance and Biz Services will do well," he said further.

"From the upgrade to 2.5% to 3.5% full year GDP for 2013, this implies that the government is looking at 2H growth to be from 3.1% to 5% y/y. This is quite strong growth but it's within UOB's forecast because of the reasons I talked about in my email to you yesterday. UOB's forecast of 3% full year GDP growth remains unchanged at this stage," Tan concluded.