Singapore's GDP Grows Less Than Estimated; CPI Jumps
By Shamim Adam and Jean Chua

May 23 (Bloomberg) -- Singapore's economy expanded less than initially estimated in the first quarter and inflation accelerated to a 26-year high last month, adding to concerns growth may ease as global demand weakens.

Gross domestic product increased 6.7 percent in the first three months of the year from a year earlier, less than the government's April 10 estimate of 7.2 percent, the trade ministry said today. Consumer prices rose 7.5 percent last month from a year earlier, a separate report showed.

Asia's export-dependent economies have been hurt by a slowdown in the U.S., with Malaysia and the Philippines forecast to report weaker first-quarter growth next week. Singapore's central bank today said its currency, which has gained 5.8 percent against the U.S. dollar this year, remains the most effective tool to fight inflation.

``In an environment where oil and food prices are at very high levels, the outlook is cloudy for Singapore and the rest of Asia as we head into the second half,'' said Song Seng-Wun, an economist at CIMB-GK Securities Pte. in Singapore. ``Inflation is a big worry and the top priority for most governments.''

Singapore's accelerating inflation prompted the central bank's decision to allow the currency to strengthen further last month. The monetary authority said today its currency stance ``remains appropriate'' and it has no plans to review its policy before its next meeting in October.

Malaysia, Philippines

Consumer prices are expected to rise between 5 percent and 6 percent in 2008, from a previous forecast range of 4.5 percent to 5.5 percent, the government said today.

The Singapore dollar, Asia's second-best performing currency this year, was little changed at S$1.3591 against its U.S. counterpart as of 10:55 a.m. local time. The Straits Times Index rose 0.1 percent to 3,164.85.

Economists surveyed by Bloomberg News expect Malaysia's growth to have slowed to 6.4 percent in the first quarter from 7.3 percent in the previous three months. Philippine growth may have eased to 5.9 percent from 7.4 percent, a separate survey showed. Malaysia will release its first-quarter data on May 28, and the Philippines the next day.

Asia is almost twice as reliant on exports as the rest of the world, with 60 percent of shipments abroad ultimately destined for the U.S., Europe and Japan. The Japanese government yesterday cut its view on exports for the first time in three months and maintained its assessment that a recovery in the world's second-largest economy is ``pausing.''

Exports to Ease

Singapore's trade promotion agency today lowered its forecast for export growth this year to between 2 percent and 4 percent, from an earlier range of 4 percent to 6 percent. Overseas shipments rose 0.6 percent last quarter.

Some Asian governments and central banks are predicting economic growth will be at the lower end of their targets this year, or are cutting their forecasts, even as they raise estimates for inflation.

Philippine growth may have slowed to as little as 5.2 percent last quarter as accelerating inflation dented consumer spending, Economic Planning Chief Augusto Santos said yesterday.

Rising energy and food prices are also stoking inflationary pressures and crimping domestic consumption across the region. Oil has more than doubled in the past year, and prices of grains such as rice and wheat reached unprecedented levels in 2008.

Singapore's economy increased an annualized 14.6 percent in the first three months of the year, less than an earlier estimate of 16.9 percent. The government today reiterated its forecast for the economy to grow between 4 percent and 6 percent in 2008.

`Remain Weak'

The island's manufacturing industry expanded 12.4 percent last quarter from a year earlier, accelerating from a 0.2 percent gain in the fourth quarter.

Pharmaceutical production by companies such as Merck & Co. rose almost 52 percent last quarter from a year ago, government figures show, offsetting faltering electronics output.

Singapore's electronics exports have declined for 15 consecutive months and the island's central bank in April said it expects the industry to ``remain weak.'' Electronics account for about 30 percent of Singapore's manufacturing and drugs make up around 22 percent.

Services climbed 7.5 percent in the first quarter from a year earlier, while the construction industry grew 14.7 percent, according to today's report.

City Developments Ltd., Singapore's second-largest real estate company, this month said it will delay sales of new residential projects. Confidence among prospective home buyers has been eroded by the subprime-mortgage crisis in the U.S. and the contraction in global credit markets, the company said.

Singapore home sales totaled 787 units in the first quarter, about half of the 1,449 sold in the previous three months, according to the city state's Urban Redevelopment Authority. Prices rose 3.7 percent, the smallest gain in a year.

To contact the reporters on this story: Shamim Adam in Singapore at [email protected]; Jean Chua in Singapore at [email protected].