In news just announced, Singapore's Ministry of Trade and Industry (MTI) has narrowed the nation's GDP growth forecast for 2020 to -7.0 to -5.0%, down from the earlier -7.0 to -4.0%.
This comes after the economy contracted by 13.2% on a year-on-year basis in the second quarter, worsening from the 0.3% contraction in the previous quarter. The fall in GDP was due to the Circuit Breaker (CB) measures implemented from 7 April to 1 June 2020 to slow the spread of COVID-19 in Singapore, as well as weak external demand amidst a global economic downturn caused by the COVID-19 pandemic.
Furthermore, there remain significant uncertainties in the global economy, as shared by MTI in its statement. First, 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.
Second, 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.
Third, 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.
"Against this backdrop, the outlook for the Singapore economy has weakened slightly since May," MTI explained.
Going forward, businesses in Singapore can anticipate the following outlook:
- First, the subdued external economic environment will continue to pose a drag on several of Singapore’s outward-oriented sectors such as transportation & storage and wholesale trade.
- Second, due to the protracted COVID-19 situation worldwide, the reopening of international borders is expected to take place more gradually than earlier anticipated. This is likely to weigh on the outlook of sectors that are reliant on tourism (e.g., accommodation, tour operators and MICE organisers) and air travel (e.g., air transport and aerospace).
- Third, the resumption of activity for sectors that are reliant on foreign workers who reside in dormitories has been slower than expected 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 & offshore engineering sectors is projected to be deeper and more protracted than previously anticipated. 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 & engineering services for construction projects.
Sectoral report: By how much did industries in Singapore get affected?
- The manufacturing sector shrank by 0.7% year-on-year. Manufacturing output was weighed down by output declines in the transport engineering, general manufacturing and chemicals clusters.
- The construction sector contracted by 59.3% year-on-year. Construction firms were also affected by manpower disruptions arising from additional measures to curb the spread of the virus.
- The wholesale & retail trade sector shrank by 8.2%. The retail trade segment was adversely affected by weak sales as most retailers were prohibited from operating at their physical outlets between 7 April and 18 June.
- The transportation & storage sector contracted by 39.2%. The air transport segment shrank on the back of a steep decline in air passengers handled at Changi Airport due to the global COVID-19 travel restrictions.
- The accommodation & food services sector contracted by 41.4% year-on-year. The accommodation segment shrank on the back of a plunge in international visitor arrivals arising from border controls and weak travel demand.
- The information & communications sector recorded a mild contraction of 0.5%. The telecommunications segment shrank on account of weaker demand for roaming and prepaid services due to reduced overseas travel. By contrast, the IT & information services segment expanded because of healthy enterprise demand for IT solutions.
- The finance & insurance sector expanded by 3.4% year-on-year. Growth in the sector was underpinned by steady expansions in insurance and other auxiliary activities, with the latter supported in turn by an acceleration in the adoption of digital payments.
- The business services sector shrank by 20.2% year-on-year. The real estate and “others” segments contracted because of the workplace restrictions imposed during the CB period, while the professional services segment was adversely affected by weak demand as both domestic and regional business activities slowed.
- The “other services industries” contracted by 17.8% year-on-year. This was largely due to the weak performance of the arts, entertainment & recreation (AER) and “others” segments. Both segments were negatively affected by the CB measures, which led to many firms in the segments being unable to operate at their physical premises.
"Be resilient in the face of the severe economic downturn": PM Lee's National Day message
For this year's National Day message on 9 August, Singapore's PM Lee Hsien Loong asked the nation's residents to brace for economic difficulties instead, as the crisis is far more over.
Cautioning of a possible second wave, he said: "Many countries brought COVID-19 under control and eased restrictions, only to see their cases rise sharply again. This can happen to us too, despite all our precautions. It will most likely take a year or two before a vaccine is widely available, and the threat of the virus is blunted. Until then, we have to maintain our vigilance and resolve, to keep ourselves, our loved ones and our neighbours all safe."
Referring to the Asian Financial Crisis (1997-1998), the aftermath of the 9/11 terrorist attacks (2001), and the Global Financial Crisis (2007-2009), he reminded: "Each time the outlook was ominous, and we feared the worst, but each time we worked hard to secure our position, gritted our teeth, and came through together."
As such, he expressed confidence that we will get through this current crisis too, though it may take longer. "Singaporeans are understandably anxious and worried. Business closures, retrenchments and unemployment are all likely to go up in the coming months."
On the topic of helping people find new jobs and acquire new skills, he cited the Jobs Support Scheme (JSS) and Self-employed person Income Relief Scheme (SIRS) to ease the burden on employers and individuals. He urged employers to make every effort to keep their workers, and not drop them at the first sign of trouble. "This will build loyalty, and encourage the employees to help their employers rebuild when conditions improve."