Gross domestic product jumped an annualised, seasonally adjusted 20.4 per cent in the three months through June from the previous quarter, the Trade and Industry Ministry said Tuesday in a statement.

It said GDP fell 3.7 per cent from year earlier after a 9.6 per cent drop in the first quarter.

The ministry now expects the Southeast Asian city-state's economy to shrink between four per cent and six per cent this year, better than its previous forecast of a contraction between six per cent and nine per cent.

Back with a vengeance

"The Singapore economy is back, and back with a vengeance," said Robert Prior-Wandesforde, senior Asia economist for HSBC in Singapore.

"We very much doubt that today's Singapore GDP release will be the last in Asia to provide a sizeable upside surprise."

The island's economy - which relies on exports, finance and tourism - had contracted the previous four quarters as it reeled from a collapse in global trade triggered by the financial crisis.

An annualised 16.4 per cent drop in the October-December period was the nadir of its deepest recession since splitting from Malaysia in 1965.

Singapore is the first major Asia economy to report second quarter GDP results.

The second quarter GDP estimate was calculated using data largely from April and May and is subject to revision.

Pharmaceutical boost

The ministry revised its first quarter economic figures to an annualised contraction of 12.7 per cent from its initial estimate in April of a 19.7 per cent contraction.

A surge in pharmaceutical production helped boost growth in the second quarter. Manufacturing fell 1.5 per cent from a year ago compared to a 24 per cent contraction in the first quarter. Construction rose 18 per cent in the second quarter, while services dropped 5.1 per cent.

The ministry warned that the rebound in manufacturing could wane over the rest of the year.

"A sizeable part of Singapore's manufacturing uptick came from a spike in biomedical manufacturing output and electronics inventory restocking, both of which may not be sustained," the ministry said.

Demand for exports from the United States, Europe and Japan remains weak, but Singapore's sales to Indonesia, Malaysia and China have picked up, said Irvin Seah, an economist with DBS bank in Singapore.

"The main driver for this recovery has been our exports to the region," Seah said. "We're seeing strong demand from Asia, especially China.

"Asia is showing signs that it is able to drive its own demand, which is a good sign for the region's growth."

- AP