Singapore’s economy plunged into recession last quarter as an extended lockdown shuttered businesses and decimated retail spending
- Gross domestic product declined an annualized 41.2% from the previous three months, the Ministry of Trade and Industry said in a statement Tuesday.
- It has been termed the biggest quarterly contraction on record and worse than the Bloomberg survey median of a 35.9% drop.
- Compared with a year earlier, GDP fell 12.6% in the second quarter, versus a survey median of -10.5%.
A plunge in global trade has hit the export-reliant manufacturing industry, while retailers saw a record decline in sales after partial lockdown measures were imposed last quarter. The government, which has projected a full-year economic contraction of 4%-7%, didn’t provide a new forecast Tuesday.
Singapore is one of the first countries to report quarterly GDP data, and the figures show it’s taking a bigger hit than many others in Asia.
To salvage the economy, The government has already pledged about S$93 billion ($67 billion) in stimulus to shore up troubled businesses and households and prevent a surge in retrenchments.
The second quarter may mark the low point for the economy, although the recovery is likely to be slow and gradual. Most businesses began resuming operations from late June, but border controls and social-distancing rules, which limit mobility, remain.
$67 billion bail out all part of the great hocus-pocus?
Despite the fourth stimulus, a deeper GDP fall this quarter and negative growth for the rest of the year is still very much a possibility for the heavily export-dependent economy
“This is the bottom, unless Singapore is forced to regress to the harsher iteration of circuit-breaker measures,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “The case for more stimulus is neither ruled out nor a mechanical reaction to this backward-looking data point. The four fiscal packages need time to permeate and cascade.”
Quick one – Singapore’s total stimulus package amounts to something like SGD 92.5 billion, about 19% of GDP.
Termed as “The Fortitude Budget”, the SGD 33 billion new supplementary budget builds on previous three such budgets (Unity, Resilience, and Solidarity budgets) to provide more support for workers, businesses, households, communities and frontline agencies dealing with the pandemic.
The main focus of the new package is preserving jobs by further enhancing the jobs support scheme, extended waiver of foreign worker levy, rental grants for SMEs, and measures to create 40,000 new jobs in public and private sectors this year.
Hold on a minute, won’t a massive stimulus package give the export-reliant manufacturing industry a boost?
Even with a massive stimulus, large GDP contraction this quarter and potentially negative growth for the rest of the year could still become a reality for the heavily export-dependent economy given extremely weak global demand. That said, the unprecedented stimulus should go some way in lifting the confidence and facilitating a more vigorous post-Covid recovery than would otherwise have been the case.
“Given significant front-loading of fiscal and monetary policy, there is a relatively high bar for additional stimulus from here,” said Selena Ling, head of treasury research and strategy at Oversea-Chinese Banking Corp. She expects the economy will contract 5.5% for the full year.
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