GDP may have expanded 6.5% in 4Q 2010

The economy has adverted a pharma led technical recession due to bounce back in drugs production in the final quarter.

According to DBS, the economy has also rebounded from the sharpest quarter on quarter drop of 18.9% in 3Q 2010.

The headline GDP growth figure is expected to report an expansion of 6.5% QoQ saar (12.5% YoY). This brings full year GDP growth for 2010 to 14.7%, which is exactly what the advance estimates had shown last month.

While overall manufacturing growth is likely to clock 26.4% YoY, a tad below a 28.2% expansion indicated in the advance estimates, DBS believes the buoyant showing in the services sector in December should help to offset the softer output growth in manufacturing. The services sector is predicted to grow by 8.9% in 4Q10 with strong contributions coming from the other services segment due to the added impetus from the IRs. Base on DBS' estimation, the two IRs have injected about SGD 2.0bn in their first year of operation and will likely be the fastest growing industry this year. Separately, the construction sector should report a slight improvement of 0.7% versus -1.2% in advance estimate as momentum picks up in a few of the current public transportation projects.