Singapore's economy recovered strongly in 2010, expanding by 14.5%, driven by rapid growth in manufacturing and services. The economy is now expected to move to a more stable growth path, with real GDP growth averaging 5% a year during the forecast period. However, as the economy remains largely unchanged structurally and continues to be dominated by the external sector, it will continue to be exposed to fluctuations in global demand. The Economist Intelligence Unit's central forecast is that world economic growth will remain steady at around 3% a year over the next five years, but there is a risk that the pace of global growth will falter and thereby damage growth prospects in Singapore, particularly if sovereign debt troubles worsen in the euro zone or if political unrest in North Africa and the Middle East causes international crude oil prices to remain at their current high levels this year and next. Based on our central forecast, Singapore's exports of goods and services will grow at an average annual rate of 9.5% in the next five years. Gross fixed investment is expected to expand by an average of 7% a year in the forecast period, bolstered by large government-funded projects, while private consumption growth will remain healthy, averaging 4.2% a year. The government will remain supportive during the early part of the forecast period, providing a range of measures to bolster consumption and investment.

On a sectoral basis, the industrial sector (including construction) is expected to grow at an average rate of 5.1% a year in 2011-15, boosted by solid gains in manufacturing. Biomedical firms will play an increasingly important role in the manufacturing sector during the forecast period, following output growth in the biomedical subsector of 49.8% in 2010. Although output in the biomedical segment can fluctuate strongly from one month to the next, owing to factory shutdowns as the product mix is changed, the subsector is less sensitive than the electronics industry to fluctuations in the rate of global economic growth. Solid growth in external demand during the forecast period will help to boost entrepôt trade, while rising business and consumer confidence will help to support the wholesale and retail services sectors. Although there are concerns about excess room capacity in hotels now that two casino-based hotel resorts have opened, the new developments represent a major boost to Singapore's tourism infrastructure.

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