With the COVID-19 pandemic having led to a severe contraction in economic activity globally, the Singapore economy will enter a recession this year.
In its Macroeconomic Review published on April 28, Monetary Authority of Singapore (MAS) said the country’s GDP growth is projected at –4 to –1 per cent.
Based on the Advance Estimates released by the Ministry of Trade and Industry on March 26, the Singapore economy had contracted by 2.2 per cent year-on-year in Q1 2020. This is following the 1 per cent expansion in the preceding quarter.
On a quarter-on-quarter seasonally adjusted basis, GDP declined sharply by 10.6 per cent, after expanding by 0.6 per cent in Q4 2019.
"The outbreak of COVID-19 domestically and abroad has weighed on a broad spectrum of economic activities,” MAS said in its report. Travel-related industries, such as aviation and tourism, have been hardest hit.
According to the latest available statistics from STB, visitor arrivals plunged by 51 per cent y-o-y in February. The figured have grounded to a halt since March 23 as a series of ever tightening restrictions culminated in a complete ban on short-term arrivals.
Consequently, passenger movements at Changi Airport fell by 71 per cent in March. Revenue per available room also plummeted as the hotel occupancy rate tumbled to 51 per cent in February from an average of 87 per cent in the past six months. With tourist arrivals coming to a standstill, the arts, entertainment and recreation industry weakened sharply as well.
Meanwhile, consumer-facing sectors have also been severely affected by social distancing measures and heightened uncertainty.
Construction activity also declined in Q1, in part reflecting disruptions to the inflow of workers and raw materials. The manufacturing sector recorded its fourth consecutive quarter of contraction, with lacklustre performances across most segments except for the biomedical and precision engineering industries.
MAS noted that overall, the near-term outlook for the Singapore economy is fraught with uncertainty. “There is poor understanding of the evolution of the COVID-19 situation globally, which in turn implies that the depth and duration of the downturn in Singapore, as well as the strength of the eventual recovery, remain unknown.”
In all likelihood, Singapore’s GDP will contract more sharply in Q2 2020 than in Q1, MAS said. This is given the severity of spread of the virus in Singapore’s major trading partners, as well as the strict measures to break the circuit of transmission domestically.
“It is unclear at this stage if the disease will taper off globally in the second half of the year, and the risks of subsequent waves of infections are high until a vaccine is found.” This could mean that intermittent rounds of re-containment measures may be required, thus hampering a decisive rebound in economic activity, MAS explained.