The Ministry of Trade and Industry (MTI) said gross domestic product (GDP) grew 3.8 per cent on-year in the second quarter, higher than early estimates of a 3.7 per cent rise.
It is the strongest growth in three years and a hefty improvement from the 0.2 per cent growth recorded in the first quarter.
On a quarter-on-quarter basis, GDP grew 15.5 per cent, significantly higher than the 1.7 per cent expansion in the previous quarter.
Following the strong performance, the ministry upgraded the GDP growth forecast for 2013 to 2.5-3.5 per cent, better than the previous prediction of a 1-3 per cent growth.
The upward revision of Singapore's growth outlook came as no surprise.
Prime Minister Lee Hsien Loong had disclosed the more optimistic GDP forecast in his National Day message last week.
And at a news briefing on Monday, MTI said the revision was due to better-than-expected economic growth in the first half, particularly from non-trade related sectors like finance.
But there are downside risks to growth.
Ow Foong Pheng, Permanent Secretary for Trade and Industry, said: "Our expectations and our forecast for growth for the second half of 2013 are based on a central scenario of 7.5% growth for China. We do not expect a hard landing, but of course these things depend on whether there are unexpected consequences to some policy moves that (the) Chinese government makes."
On a quarter-on-quarter basis, the manufacturing sector soared 32.1 per cent in Q2, a sharp rebound from the 12.1 per cent contraction in the previous quarter.
The construction sector jumped 11.2 per cent, faster than the 10.3 per cent growth in the preceding quarter.
In the services producing industries, the wholesale & retail trade sector expanded by 22.1 per cent, in contrast to the 2.6 per cent contraction in the first quarter.
The transportation and storage sector grew by 19.6 per cent. The finance and insurance sector expanded by 9.2 per cent following a surge of 51.2 per cent in the preceding quarter.
As Singapore's economic growth forecast was upgraded, export growth for the year was revised down.
Non-oil domestic exports (NODX) is now expected to be flat or grow 1 per cent.
The full-year trade forecast was also downgraded to between 2 and 3 per cent.
Trade agency IE Singapore said domestic exports fell 4.9 per cent on-year in Q2 while non-oil re-exports (NORX) jumped 12.2 per cent.
UOB economist Francis Tan said: "We see a discrepancy between the re-exports and the domestic exports. That could be due to two reasons - number one, it could be due to cost competitiveness, so products that are coming in to Singapore are getting re-exported, rather than being value-added in Singapore and getting re-exported as domestic exports. On the second front, it could really be due to the product mix that Singapore is producing for the domestic exports."
With the full-year GDP growth expected to come in at between 2.5 and 3.5 per cent, UOB Economic-Treasury Research says this implies the economy will grow between 3.1 and 5 per cent in the second half of the year. - Channel News Asia
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