Singapore’s Economic Contraction Worse than Expected 

On Tuesday, Singapore reported that its economy contracted more than initial estimates and narrowed its economic forecast for the full year of 2020.

In the second quarter of 2020, Singapore’s economy contracted by 42.9% compared to the previous quarter on a seasonally adjusted and annualized basis, said the Ministry of Trade and Industry.

The updated figure was worse than last month’s official earlier estimate. The value confirmed that Singapore had entered a technical recession.

The estimated computer mainly from April and May data had shown a shrinking economy by 41.2% in the second quarter compared to the previous three months.

According to the ministry, Singapore’s GDP shrank by 13.2% in the quarter ended June 30 on a year-by-year basis.

The GDP is worse than the earlier estimation of 12.6% year over year contraction and 0.3% on-year dip recorded in the first quarter.

Singapore’s economy largely shut following a partial lock down in early April. The government called it a “circuit breaker” to slow the spread of coronavirus.

However, the country started easing most restrictions in early June, allowing the economy to reopen.

According to the ministry, the fall in Singapore’s GDP resulted from the Circuit Breaker (CB) measures implemented between April and June 2020. The weak external demand amidst the global pandemic also contributed to the drop.

According to the ministry of health, Singapore has recorded over 55,000 confirmed infections and 27 deaths from the virus.

As of Monday’s report, most of them have recovered, with only 5,656 cases still “active.”

The partial lock down halted construction activity during the second quarter causing the sector to plunge 59.3% year over year in the second quarter.

The ministry added that an outbreak among migratory workers who worked in the construction sector added to its weakness.

How Other Sectors Performed in the April-June Quarter

• Manufacturing dropped by 0.7% year over year.
• Accommodation and food services shrank 41.4% on-year.
• Transportation and storage plunged 39.2% from the previous year.
• Wholesale and retail trade dropped 8.2% year on year.
• Finance and Insurance is the only sector that registered growth by 3.4% over the same period.

Revised 2020 Forecast

The Ministry of Trade and Industry revised Singapore’s full-year forecast to record an economic contraction of between 5% and 7% in 2020.

The ministry previously expected the GDP to fall between 4% to 7%. Furthermore, the ministry said Singapore’s economy had weakened slightly since May.

The ministry cited three reasons for Singapore’s deteriorating outlook.

• Subdued external economic environment weighs down sectors such as storage, transportation, and wholesale trade.
• The reopening of international borders will be gradual than earlier expected, putting pressure on sectors reliant on tourism and travel.
• Sectors reliant on foreign workers living in dormitories will take longer than expected to resume activity. Foreign workers account for more than 90% of Singapore’s overall confirmed cases.

However, the ministry added that Singapore has several economic strengths.

It explained that demand for semiconductors was stronger than expected. The biomedical manufacturing cluster is expected to grow further.

However, the ministry said there were still uncertainties in the short term.

With the narrowing forecast range, uncertainty continues to be significant over how the coronavirus situation will evolve in the coming quarters corresponding to the economic recovery trajectory in both global and domestic economies.