S'pore heads for deeper recession: 2020 growth forecast cut to between -7 and -4% on Covid-19 impact

The circuit breaker measures implemented to curb the spread of Covid-19 in Singapore have further dampened domestic economic activity, along with domestic consumption.
PHOTO: The Straits Times

SINGAPORE - Singapore will sink into a deeper recession than earlier forecast this year amid the deterioration in global demand from the coronavirus pandemic as well as the expected impact of circuit breaker measures at home.

The economy will shrink by 7 to 4 per cent, worse than the 4 to 1 per cent contraction earlier predicted, said the Ministry of Trade and Industry (MTI) on Tuesday (May 26).

MTI said that there were significant uncertainties in the global economy, with a risk that subsequent waves of infections in major economies such as the United States and Eurozone could further disrupt economic activity. In particular, if infections start to rise and strict measures such as lockdowns and movement restrictions are reimposed, the downturn in these economies could be more severe and prolonged than expected.

Also, a growing perception of diminished ability to use fiscal and monetary stimulus in many major economies could damage confidence in authorities' ability to respond to shocks, undermining risk appetite and driving further financial market volatility, with negative spillovers for the broader global economy, it said.

"Against this backdrop, the outlook for the Singapore economy has weakened further since March," MTI said in a press release.

The ministry said that outward-oriented sectors such as manufacturing, wholesale trade and transportation & storage 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.

The circuit breaker measures implemented to curb the spread of Covid-19 in Singapore, which include the closure of most workplace premises, have further dampened domestic economic activity, along with domestic consumption, it said.

In the first quarter of this year, the economy contracted by 0.7 per cent year on year, a reversal from the 1.0 per cent growth in the previous quarter but better than the 2.2 per cent drop earlier estimated.

On a quarter-on-quarter seasonally-adjusted annualised basis, the economy shrank by 4.7 per cent, a pullback from the 0.6 per cent expansion in the fourth quarter of last year.

This article was first published in The Straits Times. Permission required for reproduction.

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