DBS Bank has raised Singapore’s full-year GDP forecast to 13 percent, up from the previous 10.3 percent, attributed to the 15.5 percent year-on-year increase in Q1 on the back of strong production in the manufacturing sector.
DBS is also optimistic on the GDP figures for Q2, with the manufacturing sector expected to post a quarterly expansion of about 50 percent on-year due to the robust expansion of the pharmaceutical and electronics segments.
However, the bank said it expects growth to slow in the second half, moderating to an average ten percent year-on-year growth.
The bank does not expect the current expansion pace in the manufacturing sector to be sustained in H2 2010. The main concerns are demand weakness due to policy tightening in Asia and the austerity measures in Europe.
But despite this, the bank said it does not expect the Monetary Authority of Singapore (MAS) to change its exchange rate policy during its October meeting.
DBS is forecasting inflation to be 3.8 percent in the second half of 2010, up from 2.2 percent in H1 and almost 2.5 times the historical average of 1.5 percent. The bank cited higher food inflation, an increase in COE prices and the still buoyant market as some of the factors contributing to this.