Singapore's economy expanded at a faster than forecast 11.9 per cent in the second quarter due to surging exports by manufacturers such as Creative Technology Ltd and GlaxoSmithKline Plc.

Annual growth in gross domestic product in the quarter ending June 30 outpaced the government's initial estimate of 9.1 per cent, the Trade and Industry Ministry said in a statement.

"There's still resilience in the economy," said Sim Wong Hoo, chief executive of Creative Technology, which makes Nomad digital music players and Sound Blaster sound cards. "When we go out and advertise, our demand shoots through the roof."

The recovery, after three recessions since 1998, comes as Prime Minister Goh Chok Tong hands over power to his deputy Lee Hsien Loong, who will be sworn tomorrow. On Sunday Goh raised the government's maximum growth forecast for 2004 to 9 per cent from 7.5 per cent.

"He's stepping down with the economy right at the top," said Song Seng Wun, an economist at G.K. Goh Holdings Ltd. "The challenge for his successor is to sustain growth and create more jobs. High growth doesn't necessarily result in high job creation."

Jobs challenge

Singapore's unemployment rate was unchanged at 4.5 per cent in the second quarter. The recovery is not creating as many jobs as previous expansions because the growth is coming from industries such as pharmaceuticals and semiconductors, which employ fewer people. Singapore added a little over half as many jobs in the first six months of this year as it did in the same period of 2000, when economic growth was slower.

"Growth has been very strong this year, but the industries driving it don't create enough jobs for everybody who's been displaced in the last five years," said Lian Chia Liang, an economist at J.P. Morgan Chase & Co in Singapore. "People aren't feeling like they're living in an economy that's growing 10 per cent."

From a year earlier, the economy expanded 12.5 per cent in the second quarter, the ministry reported. Singapore's economy may grow by between 3 per cent and 5 per cent in 2005.

The service industry expanded 11.6 per cent in the second quarter from the year before, the ministry said. Construction shrank 5.1 per cent.

Singapore's exports surged 21 per cent in the second quarter from a year earlier and 17.8 per cent in the first six months of the year, according to International Enterprise Singapore, the trade promotion agency.

The economy added 10,400 jobs in the three months ending June 30, the Ministry of Manpower said last month, fewer than the 13,700 jobs created in the first quarter and the 16,200 in the final quarter of 2003. The number of unemployed was 89,000 on a seasonally adjusted basis.

Oil prices

The island's jobless rate is expected to fall below 4 per cent by the end of this year as economic growth will boost employment, said Elizabeth Quah, a divisional director in the Manpower Ministry.

The trade ministry said it expects economic growth to slow in the second half to a more sustainable pace of six to eight per cent from a year earlier, compared with 10 per cent expansion in the first half.

Growth in the electronics industry will help Singapore weather the effect on the global economy of record-high oil prices, said Friedrich Wu, director of economics at the trade ministry.

Crude oil rose to US$44.99 a barrel in after-hours electronic trading on the New York Mercantile Exchange on Monday, the highest price since crude futures began trading on the exchange in 1983. Crude futures have risen 39 per cent in a year.

"We don't expect a great deal of damage even if oil prices sustain above US$40 a barrel through the end of the year," Wu said. "Even if annualized growth is zero in the third and fourth quarters, we will still get 8.5 per cent growth for the full year."

Singapore is also benefiting from tax breaks and other incentives offered by the government to attract investments by drug companies including GlaxoSmithKline and Pfizer Inc, reducing reliance on the production of electronics, economists said.

(China Daily 08/11/2004 page12)