SINGAPORE: Singapore has narrowed its economic forecast for 2020 to a contraction between 5 and 7 per cent, the Ministry of Trade and Industry (MTI) said on Tuesday (Aug 11), as data showed a steep slump in the second quarter amid the COVID-19 pandemic.
The earlier projection made in May was for the economy to shrink between 4 and 7 per cent.
AdvertisementAdvertisement“Notwithstanding the narrowing of the forecast range, there continues to be significant uncertainty over how the COVID-19 situation will evolve in the coming quarters, and correspondingly, the trajectory of the economic recovery in both the global and domestic economies,” MTI said in its report.
[h=3]READ: Singapore's GDP expected to shrink between 4% and 7% as 2020 growth forecast cut again on COVID-19 impact[/h]The report said Singapore’s external demand outlook has weakened “slightly” since May, with many of Singapore’s key final demand markets seeing worse-than-projected economic disruptions in the second quarter.
These markets are expected to experience a more gradual pace of recovery in the second half of 2020, given the threat of localised outbreaks and the continued need for restriction measures to contain such outbreaks as they occur.
AdvertisementAdvertisementThe global economy is also seeing significant uncertainties, MTI said, citing how a major resurgence of COVID-19 infections could lead to a significant tightening of public health measures or a re-imposition of nationwide lockdowns across the major advanced and emerging economies.
“This could result in an even sharper and more protracted period of economic slowdown in these economies,” it said.
In addition, the global economic downturn could increase financial system stresses, including a rise in corporate indebtedness, financial market dislocations and capital outflows from emerging market economies.
“These could in turn trigger negative feedback loops and potentially intensify the global recession,” MTI said.
Meanwhile, there are risks arising from geopolitical tensions and anti-globalisation sentiments, such as increased protectionism, which could result in further disruptions to global supply chains. The latter could in turn weigh on global trade and the global economic recovery, MTI added.
SLOWER REOPENING OF INTERNATIONAL BORDERS
Turning to Singapore, MTI said this subdued external economic environment will continue to pose a drag on several of Singapore’s outward-oriented sectors such as transportation and storage, and wholesale trade.
[h=3]READ: Singapore’s economic situation remains dire, with recovery likely to be ‘slow and uneven’: MAS[/h]The reopening of international borders is expected to take place more gradually than earlier anticipated given the protracted COVID-19 situation worldwide, which will likely weigh on the outlook of sectors that are reliant on tourism and air travel.
In addition, the resumption of activity for sectors that are reliant on foreign workers who reside in dormitories has been slower than expected, MTI said.
This is due to the longer time taken to clear these workers for work, as well as the challenges faced by firms in meeting the safe management measures required at workplaces for a safe restart.
“In particular, the downturn in the construction and marine and offshore engineering sectors is projected to be deeper and more protracted than previously anticipated,” it said.
“A sharper slowdown in these sectors is also expected to have negative spillover effects on firms in supporting industries, such as professional services firms providing architectural and engineering services for construction projects.”
AREAS OF STRENGTH
Nonetheless, MTI said there are several areas of strength in the Singapore economy, such as how the outlook for the electronics and precision engineering clusters has improved on the back of stronger-than-expected demand for semiconductors and semiconductor equipment.
The biomedical manufacturing cluster is also expected to continue to grow, supported by the production of pharmaceutical and biological products.
Similarly, the finance and insurance, and information and communications sectors are projected to expand this year, MTI said.
The former will be supported in part by the strong demand for digital payment processing services, while the latter will benefit from firms’ continued demand for IT and digital solutions.
Q2 GDP SLUMP
MTI’s report also provided an update on growth numbers for the second quarter, which bore the brunt of the impact from the “circuit breaker” rules.
The Singapore economy contracted by 13.2 per cent on a year-on-year basis in the April to June quarter, worse than the 12.6 per cent decline seen in the Government’s advance estimate and a sharp deterioration from the 0.3 per cent contraction in the previous quarter.
On a quarter-on-quarter seasonally adjusted annualised basis, the economy shrank by 13.1 per cent, better than the estimate of a 41.2 per cent plunge but much worse than the 0.8 per cent fall in the first quarter.
[h=3]READ: Singapore in technical recession after GDP shrinks 41.2% in Q2 from preceding quarter due to COVID-19[/h][h=3]BOOKMARK THIS: Our comprehensive coverage of the coronavirus outbreak and its developments[/h]Download our app or subscribe to our Telegram channel for the latest updates on the coronavirus outbreak: https://cna.asia/telegram
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