Singapore's central bank chief said as much as 20 per cent of the city-state's economy faces "deep scarring" from the coronavirus pandemic.
The aviation and tourism industries are a worry, especially with an expected slow recovery in travel, Mr Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), said at a virtual event hosted by the Institute of International Finance on Monday. About 10 per cent to 20 per cent of the economy faces scarring from the virus, he added.
"What is going to happen to that industry when the planes haven't flown, the pilots haven't flown for months on a stretch?" said Mr Menon. "It's not like picking up after taking two months off. When you take two years off, it's very different."
Singapore's trade-reliant economy, already in recession, is facing its worst contraction on record of about 5 per cent to 7 per cent this year, according to official estimates.
The Government has allocated about $100 billion in stimulus to cushion the blow for businesses and help save jobs.
Mr Menon said he is aware of the risks of prolonging support, but the key is to taper the exit without pulling the rug out too suddenly.
Singapore has not seen the full extent of the crisis yet, he said, with more bad loans and bankruptcies expected through the start of next year. There is also a question of whether banks need to raise more capital.
"What I've not heard, and I think people are beginning to talk about, is whether you need to raise new capital," he said. "It's not going to be easy in a time like this."
Mr Menon said he has seen a lot of positive changes in the digital economy, and there is a greater consciousness about sustainability that has aligned with the MAS' "biggest to-do list" on environmental, social, and governance efforts.
What I've not heard, and I think people are beginning to talk about, is whether you need to raise new capital. It's not going to be easy in a time like this.
MR RAVI MENON, managing director of the Monetary Authority of Singapore.
"In a funny sort of way, the pandemic has made us all a lot more sensitive and aware of how vulnerable we are to the forces of nature," he said.