Recession In S’pore Is Inevitable Due To Covid-19, Says Economist Who Predicts 0.5% Contraction In 2020

DBS Economist Lowers Growth Forecast Again, Predicts Singapore Will See Negative Growth Up Till Q3

The Covid-19 pandemic is seeing countries go into lockdown one by one. Business have shut, and citizens have been advised — or even ordered — to stay home.

This undoubtedly would have serious repercussions on the global economy, and Singapore will definitely not be spared.

DBS bank senior economist Irvin Seah has projected that Singapore’s economy may contract 0.5% for the full-year of 2020.

Mr Seah believes Singapore is headed towards a recession
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This is the second time he has lowered the growth forecast since February, when he predicted growth to fall from 1.4% to 0.9%.

Covid-19-induced recession will continue till the year-end

According to a research note published on Thursday (19 Mar) and reported by TODAY Online, Mr Seah said a recession is “imminent”, as global restrictions on trade, investment, consumption and travel adversely affects Singapore.

Mr Seah added:

Being a small and open economy, Singapore will not be spared. A  recession in Singapore appears inevitable.

For the uninitiated, a technical recession refers to 2 straight quarters of negative growth.

This is now “almost a given”, as the impact of the coronavirus is expected to roll over to the next quarter.

Impact of Covid-19 on Singapore expected to roll over to next quarter
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Mr Seah predicts that the negative growth is slated to continue through Q3, before improving towards the year’s end.

Covid-19 to hit harder than SARS or global financial crisis

The official government forecast for Singapore’s growth in gross domestic product (GDP) for this year was downgraded in February to between -0.5% and 1.5%, reported The Business Times.

To put things in perspective, when Severe Acute Respiratory Syndrome (SARS) hit Singapore in 2003, the economy shrank 0.3% in the second quarter. This coincided with the peak of the outbreak.

However, the decline rebounded quickly in Q3 and Q4, and by the end of the year, Singapore saw a full-year growth of 4.5%.

Covid-19’s economic impact will be worse than SARS’
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Even during the global financial crisis from 2007 to 2009, Singapore managed to maintain positive growth of 0.1% in 2009.

However, referring to Covid-19, he said:

This will be a lot deeper than SARS, and more painful than the global financial crisis.

Worse still, Mr Seah expects retrenchments this year to hit about 24,500, higher the 23,430 seen during the global financial crisis.

Government to draw up to $8 billion from reserves

To cushion the economic blow of the Covid-19 pandemic, Mr Seah thinks the Government is already working on a second stimulus package.

This is on top of the $4 billion Stabilisation and Support Package announced during Budget 2020.

The imminent reveal of the second package was hinted at by Manpower Minister Josephine Teo earlier this week, The Straits Times reported.

It is intended to stabilise Singapore’s economy by supporting small and medium-sized businessses, self-employed and retrenched citizens, said Deputy Prime Minister Heng Swee Keat earlier this month.

Deputy Prime Minister Heng Swee Keat said the Stabilisation and Support Package will help businesses affected by the Covid-19 pandemic
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Mr Seah expects the package to be up to $14 billion to $16 billion (approximately 2.9% of national GDP).

As there is a budget surplus of $7.7 billion, the remaining $6 billion to $8 billion will likely be drawn from past reserves.

The end is not in sight

Although estimates predict the impact of Covid-19 to last till end 2020, it’s unrealistic to the situation not to change further.

For now, we can only try our best to work with what we know, and remain responsive to any developments.

Featured image adapted from GoodMigrations.