Singapore Raises GDP Forecasts on Building, Services

Nov. 19 -- Singapore raised its forecasts for growth this year and next after the economy extended its longest expansion since 1991 amid record bank lending to construction companies and consumers.

Gross domestic product will probably increase at the ``upper end'' of a 7.5 percent to 8 percent range in 2007, the trade ministry said in a statement today, boosting the lower end of its forecast from 7 percent. Growth in 2008 will be between 4.5 percent and 6.5 percent, higher than an earlier estimate of 4 percent to 6 percent.

Government efforts to transform the island into a financial hub for hedge funds and banks have spurred a flurry of building activity on condominiums and office towers, and prompted international schools such as the United World College to set up new campuses to meet demand from expatriates. Companies are expected to hire an unprecedented number of workers this year, offering higher salaries and boosting consumer sentiment.

``Loans growth has been impressive and we are not seeing signs that bank lending is tapering off with the construction industry still going strong,'' said Song Seng-Wun, an economist at CIMB-GK Research in Singapore. ``We're expecting growth to exceed 8 percent this year.''

The Southeast Asian economy grew an annualized 4.3 percent after adjusting for inflation, following a revised 14.5 percent gain in the second quarter, according to today's statement. Economists were expecting a 6.4 percent gain.

From a year earlier, the economy expanded 8.9 percent after gaining 8.7 percent in the previous three months. That was also lower than initial estimates.

Higher Inflation

Singapore today raised its forecast range for inflation in 2008 to between 3.5 percent and 4.5 percent, from an earlier estimate of 3 percent. Consumer prices will average 2 percent this year, it said.

Services climbed 8.3 percent in the third quarter from a year earlier, while the construction industry grew 17.7 percent in the same period, according to today's report.

The financial services industry expanded 19.9 percent last quarter, withstanding a slump in global credit markets that have triggered about $45 billion in writedowns among the world's largest banks.

The benchmark Straits Times Index has climbed 15 percent this year and reached a record high on Oct. 10. An average 3.14 billion shares traded daily on the Singapore Exchange between July and September, compared with about 979 million shares a day in the same quarter a year ago, increasing fees for stock broking firms and the fund management industry.

Home Prices

Financial institutions including UBS AG are relocating employees to Singapore, boosting demand for space as office rents in the central business district rise to record levels. Private home prices have also increased every quarter in the past 3 1/2 years.

The Canadian International School opened its fourth campus on the island in September, increasing its enrolment capacity by 1,000 students. The United World College of Southeast Asia is setting up a new school for 400 students next year, and will expand its intake to 2,500 in 2010.

``Singapore is booming,'' said Kishore Mahbubani, chairman of the college's board of governors. ``Its growth as a global economic and business centre requires the availability of international schooling opportunities for the children of the global talent that Singapore is keen to attract.''

Services, Construction

The government has resorted to withdrawing a decade-old plan that allowed deferred payments on homes to cool the private residential market, and said it will postpone S$2 billion of public projects to ease building demand and costs.

Growth in the services and construction industries has helped lessen the impact of a weaker performance in manufacturing, hindered by electronics exports which are mired in their worst slump in five years.

The manufacturing industry grew 10.5 percent in the July- September period from a year earlier, easing from the initial estimate of a 12.3 percent increase, the trade ministry said today.

Economists say they are optimistic of the city-state's growth in the fourth quarter and in 2008.

``The labor market is booming, tourist arrivals are at record levels, hotels are full and we are seeing strength across a broad swathe of service activities,'' Song said. ``It won't be that surprising if the government revises its growth forecasts again.''