SINGAPORE: Singapore is bracing for its worst-ever recession, with authorities cutting growth projections for 2020 yet again as the economy continues to feel severe strain from the COVID-19 pandemic.
Singapore’s gross domestic product (GDP) is expected to shrink between 4 and 7 per cent this year, down from the previous projected range of a contraction between 1 and 4 per cent, the Ministry of Trade and Industry (MTI) said on Tuesday (May 26).
The last time Singapore posted a full-year contraction was during the dotcom bust in 2001 when growth fell by 1.1 per cent. Its worst recession thus far happened during the Asian Financial Crisis in 1998. The economy shrank by 2.2 per cent then.
Tuesday’s cut in GDP growth forecasts deeper into negative territory marks the third revision by the country’s policymakers in slightly more than three months and follows a warning by the central bank last month of a worse-than-expected slump.
READ: Singapore will enter a recession this year, ‘significant uncertainty’ over duration and intensity – MAS
MTI said its latest downgrade is made in view of a deterioration in the external demand outlook for Singapore and the expected economic impact from the country’s “circuit breaker” measures.
“Notwithstanding the downgrade, there continues to be a significant degree of uncertainty over the length and severity of the COVID-19 outbreak, as well as the trajectory of the economic recovery in both the global and Singapore economies,” it cautioned.
A WEAKER OUTLOOK
In its report, MTI said disruptions to economic activity in major economies around the world, such as the United States and China, have been more severe than it expected two months ago.
“Significant uncertainties” also remain in the global economy, such as the risk that subsequent waves of infections in major economies like the US and Eurozone may further disrupt economic activity.
“In particular, if infections start to rise and strict measures such as lockdowns and movement restrictions are re-imposed, the downturn in these economies could be more severe and prolonged than expected,” it said.
There is also a growing perception of “diminished” fiscal and monetary policy space in many major economies, which could damage confidence in authorities’ ability to respond to shocks, undermining risk appetite and driving further financial market volatility. This will have negative spillovers for the broader global economy, it said.
Against this backdrop, the outlook for the Singapore economy has weakened further since March.
First, the outward-oriented sectors, such as manufacturing and wholesale trade, will be adversely affected by the sharper-than-expected slowdown in many of Singapore’s key markets, as well as more prolonged supply chain disruptions.
Second, the circuit breaker, which has shut down non-essential businesses since Apr 7 to curb the spread of COVID-19, has further dampened domestic economic activity, along with domestic consumption.
In particular, consumer-facing segments like retail and food services have been negatively affected by the distancing rules, it said.
Firms across most sectors, especially those that cannot operate fully from home, have also been working under reduced capacity as a result of the workplace closures and the fall in demand.
Third, sectors like construction and marine and offshore engineering have been severely affected by manpower shortages due to the outbreak of infections among foreign workers, especially those living in dormitories.
However, MTI noted that there are pockets of resilience in the Singapore economy.
Within the manufacturing sector, the biomedical manufacturing cluster is expected to continue expanding, supported by the production of pharmaceutical and biological products.
Among the services sectors, the information and communications sector is also projected to grow given firms’ resilient demand for IT and digital solutions.
MTI’s data also showed the economy contracting by 0.7 per cent year on year in the first three months of the year, better than the Government’s initial estimate of 2.2 per cent but reversing from the 1 per cent growth in the earlier quarter.
On a quarter-on-quarter seasonally-adjusted annualised basis, GDP shrank by 4.7 per cent, a pullback from the 0.6 per cent expansion in the last quarter but better than the 10.6 per cent initially expected.
TRADE FORECASTS CUT
Separately, Enterprise Singapore on Tuesday cut its 2020 forecasts for non-oil domestic exports (NODX) and total merchandise trade, citing the likely impact of the coronavirus outbreak and lower oil prices.
NODX is now expected to come in between -4 per cent and -1 per cent this year while the forecast for total trade has been adjusted downwards to -12 per cent to -9 per cent, down from earlier projections of zero per cent to 2 per cent growth for both.
READ: Transition to a ‘new normal’ after circuit breaker – How will measures be lifted beyond Phase 1?
Singapore will exit its circuit breaker as planned on Jun 1.
Measures will, however, be lifted in three phases. This cautious approach prioritises “both lives and livelihoods” and will allow the Government to have a “better control” of the situation, said National Development Minister Lawrence Wong on Monday.
READ: Singapore has to move cautiously amid ‘hidden cases’ of COVID-19 among population – Lawrence Wong
READ: President Halimah Yacob gives in-principle support to draw on reserves for 4th COVID-19 support package
Deputy Prime Minister and Finance Minister Heng Swee Keat will announce a fourth round of support measures on Tuesday afternoon to help the country tide through the coronavirus outbreak.
President Halimah Yacob has given her in-principle support to draw on the country’s past reserves for the fourth relief package, which Mr Heng dubbed the “Fortitude Budget” and will have jobs as a key focus.
So far, Singapore has confirmed a total of 31,960 COVID-19 cases.
Published at Tue, 26 May 2020 00:10:38 +0000