Coronavirus pandemic

Local economy could shrink 5.8% this year, private forecasters say

The Government has downgraded its 2020 GDP forecast four times in as many months to a range of minus 4 per cent to minus 7 per cent.
The Government has downgraded its 2020 GDP forecast four times in as many months to a range of minus 4 per cent to minus 7 per cent.ST PHOTO: TIMOTHY DAVID

Private forecasters have become more pessimistic about Singapore's economic outlook, a quarterly survey conducted by the Monetary Authority of Singapore (MAS) found.

The economy will shrink by 11.8 per cent in the second quarter from the same period last year. For the full year, a 5.8 per cent contraction in gross domestic product (GDP) is likely, the poll of 23 economists and analysts showed yesterday.

The Government has cut its 2020 GDP forecast four times in as many months to a range of minus 4 per cent to minus 7 per cent - leaving no room for doubt that the Covid-19 pandemic will make this year's slump the worst recession since independence.

Growth declined 0.7 per cent in the first quarter compared with the same period last year, slightly less than the 0.8 per cent drop the MAS survey had projected in March.

The full-year prediction is down from an estimate of 0.6 per cent expansion in the previous survey and comes after the economy grew 0.7 per cent in 2019, MAS said.

"The growth sentiment has clearly deteriorated," said United Overseas Bank economist Barnabas Gan. He expects the slide in GDP to be limited at minus 4 per cent this year.

The forecasters in the MAS survey, however, believed the outlook could be bleaker if a second wave of Covid-19 hits Singapore. A resurgence of the disease topped the list of downside risks to the outlook.

Further escalation in trade tensions was noted by 38.9 per cent of respondents as a downside risk.

Compared with the previous survey, about twice as many respondents were concerned about the risks stemming from the deterioration in the labour market, including a rise in unemployment.


The median of the forecast for unemployment rose to 3.6 per cent for this year, up from 2.4 per cent in the earlier survey.

Ministry of Manpower (MOM) data, also released yesterday, showed that the number of working people, excluding domestic helpers, fell by 25,600 in the three months to March 31 - the biggest quarterly contraction on record.

The unemployment rate for citizens rose to 3.5 per cent, 0.2 percentage point more than the rate for residents, and total unemployment stood at 2.4 per cent, MOM data showed.

DBS Bank senior economist Irvin Seah said the pessimism reflected in the MAS survey comes from the implementation of the two-month-long circuit breaker that ended on June 1, giving way to a phased reopening of the economy.

"The circuit breaker, though necessary to contain the outbreak, has been extremely detrimental to the economy, thus leading to the drastic downgrade in growth forecasts," Mr Seah said.

All 23 participants in the MAS survey expected lower corporate profitability for both the second quarter and the full year.

Most of the respondents in the survey predicted a decline in private residential property prices in the April-June period on a quarter-to-quarter basis, and more than three-quarters believed prices will be lower by the end of the year.

The median of forecasts in the MAS survey showed that construction would shrink by 11.4 per cent in 2020, wholesale and retail trade by 12.8 per cent, and accommodation and food services by 26 per cent.

Private consumption would decline 5.2 per cent, the survey found.

On the upside, more than half of those who took part in the poll believed their forecast for a deeper recession may not come to pass if the pandemic is contained.

With most countries across the world easing their lockdowns, a stronger than expected recovery in global economic activity was listed by 38.9 per cent of the respondents as an upside risk to their GDP growth estimates.

The median of estimates in the survey showed a 2.2 per cent expansion in Singapore's manufacturing sector, up from a 0.3 per cent contraction in the March survey.

The survey predicted GDP will recover to 4.8 per cent growth for full-year 2021.

A version of this article appeared in the print edition of The Straits Times on June 16, 2020, with the headline 'Local economy could shrink 5.8% this year, private forecasters say'. Subscribe