Singapore enters recession as pandemic-hit economy shrinks by 41% in second quarter ECONOMY
Latest data is worse than forecasts as virus curbs affect the country’s export-reliant industry and retail sales
Singapore’s economy fell into a recession last quarter as Covid-19 related restrictions closed businesses and dealt a huge blow to retail spending.
Gross domestic product declined by an annualised 41.2 per cent from the previous three months, the Ministry of Trade and Industry said yesterday, the biggest quarterly contraction on record and worse than the Bloomberg survey median of a 35.9 per cent drop.
Compared with the previous year, GDP fell by 12.6 per cent in the second quarter, versus a survey median contraction of 10.5 per cent. The deep slump shows the extent of damage to the economy as a result of the coronavirus pandemic.
A decline in global trade hit the country’s export-reliant manufacturing industry, while retailers registered a record fall in sales after partial lockdown measures were imposed for several weeks in the past quarter.
The government, which projected a full-year contraction of between 4 per cent and 7 per cent, did not provide a new forecast yesterday.
The dismal economic outlook has mounted pressure on Singapore’s ruling People’s Action Party, which recorded its weakest electoral performance last week.
The government pledged about S$93 billion (Dh246bn/$67bn) in stimulus spending to shore up troubled businesses and households and prevent a surge in retrenchments.
“The road to recovery in the months ahead will be challenging,” Trade and Industry Minister Chan Chun Sing said in a Facebook post.
“We expect the recovery to be a slow and uneven journey, as external demand continues to be weak and countries battle the second and third waves of outbreaks by reinstating localised lockdowns or stricter safe-distancing measures.”
On annualised quarter-on-quarter data, manufacturing fell by 23.1 per cent, compared with growth of 45.5 per cent in the previous three months.
Construction plummeted by 95.6 per cent while services shrank by 37.7 per cent, with airlines, hotels and restaurants affected during the partial lockdown, when “circuit-breaker”
restrictions were imposed from April 7 to June 1.
Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore, said the drop was probably the bottom of the cycle “unless Singapore is forced to regress to the harsher iteration of circuit-breaker measures”.
Additional stimulus measures have not been ruled out, although “the four fiscal packages need time to permeate and cascade”, he said.
Singapore’s dollar slipped by 0.1 per cent to S$1.3920 against the US dollar as of 9.05am local time yesterday.
The Straits Times Index dropped by as much as 0.6 per cent yesterday and was set for a third day of declines, its biggest losing streak since June 22.
The GDP figures provide a window into how deep a recession other Asian economies will probably face.
Thailand’s official forecast of an 8.1 per cent contraction this year is the worst in the region, while others such as India and Indonesia face an increase in Covid-19 infections that is exacerbating economic woes.
Factory purchasing managers indexes show that manufacturing across Asia began to pick up at the end of the second quarter, with early phases of reopening in many countries reviving demand.
Ho Meng Kit, head of the Singapore Business Federation, said the next two quarters would probably be better than the second quarter.
“Even as the economy has opened up since early June, for example small businesses in domestic retail, they are not at the previous levels because there is still no tourism in Singapore,” he said.
“So, there will be an impact on demand and these sectors will continue to be weak.”
Singapore’s advance GDP estimates are computed largely from data in the first two months of the quarter, and often are revised once the full quarter’s data is available.
“The question is if the second-half recovery will materialise, which will also depend on private consumption coming back,” said Selena Ling, head of treasury research and strategy at Oversea-Chinese Banking Corporation.
She forecast a full-year contraction of 5.5 per cent.