Here's the flip side to Singapore's rosier economic forecast

Analyst predicts 2.5% GDP.

According to Nomura, for the full year, the official 2013 GDP growth forecast was raised to 2.5-3.5% from 1-3%, painting a more robust picture. This shows that the government is looking for a decent growth rebound in H2 to around 4.0%, twice the pace of H1.

Nomura noted that despite the significant upgrade by the government, it thinks the forward guidance still seems still fairly cautious. Nomura revises its GDP forecast to 2.5%.

"We are less optimistic about GDP growth accelerating to 4% in H2; our forecast for Singapore GDP this year remains at the low end of the new official forecast," it said.

Here's more from Nomura:

In the press release, it highlighted that the growth outlook will “improve slightly,” on a gradual pickup in the global economy. Export-oriented sectors are expected to “provide support to growth” while domestic-oriented sectors will likely “remain resilient”.

The statement emphasized downside risks, particularly a slowdown in China and a disorderly adjustment from the Fed‟s tapering of monetary stimulus; Singapore is highly exposed to both of these scenarios.

In addition, the government lowered its forecast for non-oil domestic export growth to 0-1% from 2-4%.

Accordingly, we revise up our 2013 GDP growth forecast to 2.5%, taking into account the stronger-than-expected H1 results (2% y-o-y versus our forecast of 0.7%).

In addition, in our previous forecast we had already factored in some recovery, but there have been more supportive revisions to our assessment of the global growth outlook.

For instance, our US team revised up its Q3 and Q4 GDP growth forecast by 0.2pp (see US Economic Weekly: Eye of the data storm, 9 August 2013) while in China, following the July macro data, we now assign a lower probability to sub-7% growth over the rest of the year.

That said, because we are less optimistic about GDP growth accelerating to 4% in H2, our forecast for Singapore GDP this year remains at the low end of the new official forecast.

We expect the manufacturing recovery to be constrained by the government‟s restructuring agenda. Indeed, productivity growth in manufacturing continues to decline.

Services sector performance has decoupled from the performance of the manufacturing sector over the last few quarters, but we do not see this persisting.

In addition, services growth has been led by the financial sector, which may become pressured in an environment where the Fed is tapering its quantitative easing program.

In terms of monetary policy, the improvement in the growth outlook over the rest of the year further supports our baseline forecast, which still envisages the Monetary Authority of Singapore (MAS) keeping the policy stance one of “modest and gradual appreciation” of the SGD NEER.

Indeed, the MAS‟s deputy managing director, Ong Chong Tee, indicated that its policy stance remains appropriate.