Singapore economy plunges by worse-than-estimated 13.2% in Q2; lower 2020 outlook

SINGAPORE – Singapore suffered a deeper recession in the second quarter than earlier estimated due to the coronavirus-induced economic slump at home and abroad, the Ministry of Trade and Industry (MTI) said on Tuesday (Aug 11)..

The full-year economic outlook was also slightly lowered with MTI now forecasting gross domestic product (GDP) will shrink between 5 per cent to 7 per cent in 2020, compared to the previous forecast range of -4 to – 7 per cent.

In the second quarter, the economy contracted by 13.2 per cent year-on-year, sharper than the 12.6 per cent plunge earlier estimated and the worst on record.

The GDP decline was due to the circuit breaker (CB) measures implemented from April 7 to June 1, 2020 to slow the spread of Covid-19 in Singapore, as well as weak external demand amid a global economic downturn caused by the pandemic, said the MTI in a statement.

On a quarter-on-quarter seasonally-adjusted basis, the economy shrank by 13.1 per cent, sharper than the 0.8 per cent fall in the first quarter.

The MTI said; “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.”

Since the last GDP forecast update in May, Singapore’s external demand outlook has weakened slightly, it noted.

Many of Singapore’s key final demand markets saw worse than projected economic disruptions in the second quarter, and are also expected to experience a more gradual pace of recovery in the second half of 2020 due to the threat of localised outbreaks and the continued need for restriction measures to contain such outbreaks as they occur, the MTI said.

Throwing light on the expected recovery, the MTI said that 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.

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 – such as accommodation, tour operators and meetings and events (MICE) organisers and air travel.

The downturn in the construction and marine & offshore engineering sectors is projected to be deeper and more protracted than previously anticipated due to the longer time taken to clear foreign workers who reside in dormitories has.

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