The Ministry of Trade and Industry (MTI) has downgraded Singapore's GDP growth forecast to “-0.5 to 1.5 per cent”, amid the COVID-19 outbreak and uncertainties in the global economy.
In November 2019, the ministry had announced a GDP growth forecast of “0.5 to 2.5 per cent” for 2020. Growth is expected to come in at around 0.5 per cent, the mid-point of the forecast range, MTI said in a press statement on February 17.
The Singapore economy grew by 1.0 per cent on a year-on-year basis in the fourth quarter, faster than the 0.7 per cent growth in the third quarter. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded at a slower pace of 0.6 per cent compared to the 2.2 per cent growth in the preceding quarter.
For the whole of 2019, the Singapore economy expanded by 0.7 per cent, slower than the 3.4 per cent growth recorded in 2018.
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MTI added in its statement that the outbreak of the coronavirus disease 2019 (COVID-19) has affected China, Singapore and many countries around the world. In Asia, the COVID-19 outbreak is likely to dampen the growth prospects of China and other affected countries this year.
The outbreak is expected to affect the Singapore economy through several channels. Outward-oriented sectors such as manufacturing and wholesale trade will be affected by the weaker growth outlook in several of Singapore’s key final demand markets, including China. Firms in these sectors could also be affected by supply chain disruptions arising from prolonged factory closures and labour shortages in China.
In addition, the outbreak has led to a sharp fall in tourist arrivals, particularly from China, to Singapore. This has badly affected the tourism and transport sectors. Domestic consumption in Singapore is likely to decline as locals cut back on shopping and dining-out activities – which will adversely affect firms in segments such as retail and food services.
Meanwhile, US-China trade relations remain uncertain, especially as they turn to more contentious issues in the next phase of negotiations. Geopolitical tensions in the Middle East could also affect financial and commodity markets, which will have negative spillover effects on the region and Singapore.
Nonetheless, there are pockets of relative strength in the Singapore economy, MTI said. The construction sector is projected to post steady growth given the rebound in construction demand since 2018. The information & communications sector is also expected to be resilient on account of sustained enterprise demand for IT solutions.