According to preliminary estimates released by the trade ministry, Singapore’s export-focused economy sharply contracted in the second quarter of the year, putting it on track for its worst economic showing since independence and sending the city state into a technical recession.
Singapore is often viewed as a pacesetter for the region, as it is one of the first Asian economies to publish quarterly data. Its GDP shrank by 41.2 per cent on a quarter-on-quarter for the second quarter, seasonally adjusted annualised basis, after a 3.3 per cent drop in the first quarter.
The steep decline was due to the partial lockdown imposed from April 7 to June 1 after the number of coronavirus cases in the city state shot up along with the “weak external demand” amid the global economic downturn caused by the pandemic, according to the Trade and Industry Ministry.
In the April to June period, the ministry said the economy contracted by 12.6 per cent year-on-year as it maintained its full-year growth forecast to come in at a -7 to -4 per cent range, after revising its budget figures downwards thrice this year with the most recent revision made in end-May.
A surge in output in biomedical manufacturing made the manufacturing sector the only sector that grew at 2.5 per cent on a year-on-year basis. The chemicals, transport engineering and general manufacturing sectors were heavily weighed down due to weak external demand and workplace disruptions during the three-month partial lockdown period.
The figures were in line with predictions and expected by analysts, as the partial lockdown forced most businesses and workplaces to shut.
Selena Ling, head of treasury research and strategy at OCBC Bank, said “everything ground to a halt,” adding that most sectors had been badly hit by the pandemic.
“For construction, for instance, because all the foreign workers were on stay-home notices in the dormitories, the [sector] would have easily seen up to 80 per cent of activity stalling.”
The construction sector saw a 95.6 per cent contraction from the previous sector, which on a year-on-year basis was down 54.7 per cent. As infection numbers have come down significantly, the city state has been gradually easing back its circuit breaker measures since last month.
As of Monday, there were nearly 50,000 coronavirus infections recorded. The government has put in place safe-distancing measures which must be enforced by retail outlets and restaurants that have reopened, i.e., they must adhere to a cap of five people per table for dine-ins.
Cinemas have been permitted to reopen, but have to limit the number of patrons to 50 people per hall. Things are to likely look up as suggested by Lee Ju Ye, economist at Maybank Kim Eng, who feels the second-quarter’s dismal results as “the very bottom” of the downturn.
Lee noted the signs of recovery in the exports sector together with the steady global demand for electronics. “Similarly, we think that Singapore is past its worst and its exports didn’t suffer a big hit because the pharmaceutical [sector] had helped propped up demand,” Lee said.
“External demand is improving given that a lot of countries are emerging from lockdowns.” Lee remains cautious as to whether the government’s target of creating 100,000 jobs could be met, since most recovering businesses would not need extra manpower for now.
OCBC Bank’s Ling said, “I am hoping that the external demand environment will pick up such that you don’t get businesses and consumer confidence continue to remain weak. If the demand is not there, the relief measures can only last that long, then at some point, when the relief measures run out, you are still stuck in a scenario where demand is still very tepid.”
14th July 18:30
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