S’pore Faces Worst Recession In History, GDP Growth Contracts More Than Expected

S’pore GDP Growth Estimated To Contract By 5-7% In 2020

Singapore’s GDP growth for 2020 is expected to contract by more than initially expected, confirmed the Ministry of Trade & Industry (MTI) in a press release on Tuesday (11 Aug).

This means that our economy will take a larger hit overall – based on confirmed year-on-year percentage changes for Q2- a little more than previously expected.

• Q1: -0.3%
• Q2: -13.2%
• Q3: TBD
• 2020: -5 to 7%

We breakdown the updated MTI forecast per industry below & summarise some possible implications these figures could have.

GDP growth expected to shrink by 5-7%

The 5-7% decline in GDP growth is a grimmer estimate than previously reported. This is attributed to the economic outlook for Q2 & Q3 now that we’re halfway past the midpoint of 2020.

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MTI revised this from 4-7%, as reported 3 months ago in May.

For Q2 figures, Singapore also experienced a weak external demand for our goods & services, attributed to the Covid-19 pandemic which caused a global downturn.

Transport, food & accommodation take ~40% large hits

Both the transport, accommodation & food services sectors took sharp Q2 contractions at around 40% — largely due to a decline in air passengers & traffic at Changi Airport.

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The largely global ban on international travel meant that less visitors arrived in Singapore.

Work-from-home also reduced takings from public transport vendors. F&B demand also declined with dining-in prohibited during the Circuit Breaker.

Construction shrinks by a whopping 59.3%

Since all construction activities were halted during the Circuit Breaker, manpower disruptions arising from dormitory quarantines & testing were inevitable.

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This explains why one of the most hit industry sectors was construction, which posted -59.3% year-on-year GDP growth figures.

• Q1: -1.2%
• Q2: -59.3%

Retail growth slows as brick & mortar shops were closed

As for the retail industry, it boasted a steady single-digit decline of 8.2%, compared to 5.6% decrease in Q1.

Weak sales during the Circuit Breaker contributed to this result, as stalls were ordered to shut their brick & mortar units from 7 Apr to 18 Jun for safety reasons.

Manufacturing losses buffered by semiconductor demand

Even the ever stable manufacturing sector took a hit in Q2’s confirmed year-on-year figures:

• Q1: +7.9%
• Q2: -0.7%

These were due to output declines in transport engineering, general manufacturing & chemicals clusters.

The bright spots in this industry remain in biomedical, electronics & precision engineering — which experienced a rise. This was due to better than expected demand for 5G semiconductors, data centres, cloud services.

Global situation doesn’t look great

Over in America, MTI shares that the second half of 2020 will also look slower due to a “rise in infections” and dampened consumer sentiment.

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This forecast was extended to Europe as well, due to the continued need for safe-distancing and cautious reopening of markets.

As for China, their economy rebounded in Q2 despite a decline in Q1. Investment growth will continue to drive their recovery but the future remains uncertain.

Hang in there & soldier on

Although the forecast looks pretty grim for us, we can still harbour hope that the condition will improve as these are still estimated figures.

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If Singapore can get our Covid-19 community spread under control, with a cautious shift to Phase 3, this could improve things slightly in the near future.

We’d like to encourage everyone who’s looking for a job or has difficult circumstances to hang in there & soldier on.

Featured image adapted from Tech Gov SG.