Thursday, April 14, 2011

Singapore's Strong Boom Continues

According to an advance estimate ,Singapore's GDP growth accelerated during the first quarter to 5.4% or an annualized 23.5%. Yearly growth slowed to 8.5% because growth was even stronger in Q1 2010, but as yearly growth was 16.4% in Q1 2010, this means that in 2 years, GDP is up 26.3%.

While this boom is partly a cyclical rebound from the deep 2008-09 slump, it is mostly a result of Singapore's structural economic strength.

The high level of growth together with the high level of inflation (5%) means that Singapore's central bank will likely allow a faster rate of appreciation of the Singapore dollar against the U.S. dollar. As the exchange rate is controlled by the central bank and as it needs to make it stronger, the Singapore dollar's continued appreciation is one of the safest bets around. Just how great those gains against the U.S. dollar will be however depends on how the U.S. dollar performs against other currencies.