Singapore suffered its deepest economic slump on record in the second quarter, prompting the Government to trim its growth outlook for the year and warn of more job losses.
With the pandemic still raging, the road to recovery is likely to be long and rough, said Minister for Trade and Industry Chan Chun Sing.
The economy is expected to shrink between 5 per cent and 7 per cent this year, said the Ministry of Trade and Industry (MTI), dialling down its previous forecast of a 4 per cent to 7 per cent contraction.
The circuit breaker measures exacted a steep toll during the second quarter, as the economy shrank 13.2 per cent from a year earlier.
"This is our worst quarterly performance on record," said Mr Chan. "The forecast for 2020 essentially means the growth generated over the past two to three years will be negated.
"Some are still hoping for a quick recovery, and a return to the familiarity of the old normal. The painful truth is this - we are not returning to a pre-Covid world, recovery will be some time yet and is not likely to be smooth," he told reporters at a virtual briefing yesterday.
While the circuit breaker measures from April 7 to June 1 ate into domestic demand, external demand also remained weak on account of the global downturn.
Demand is expected to pick up as domestic consumption gets back on track and lockdowns are lifted elsewhere, said Permanent Secretary for Trade and Industry Gabriel Lim. The gross domestic product is likely to shrink more gradually in the third and fourth quarters, year on year.
However, there is still considerable uncertainty over future growth prospects, Mr Lim said.
"Many of Singapore's key final demand markets... are also expected to experience a more gradual pace of recovery in the second half of 2020 due to the threat of localised outbreaks," he noted.
While a shrinking economy could hurt the job market further, efforts are under way to cushion the blow.
Manpower Minister Josephine Teo said yesterday that a key focus now is to help companies retain as many of their workers as possible.
About 92,000 jobs, traineeships or work attachments have been made available to job seekers, as part of the SGUnited Jobs and Skills Package. Most of these are roles for professionals, managers, executives and technicians.
About 24,000 of these positions were filled as at the end of last month, which is "quite encouraging", said Mrs Teo. About six in 10 are short-term positions for up to 12 months.
However, the labour market is expected to remain soft in the coming quarter, noted the Ministry of Manpower's divisional director for planning and policy Kenny Tan. "Businesses will still remain very cautious about hiring, so there's a dampening of hiring demand, and we will expect increased pressure to retrench," he said.
Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said external demand will remain relatively weak, with major economies like the United States, Australia and Hong Kong combating localised outbreaks, coupled with delays in the reopening of international borders.
Enterprise Singapore upgraded yesterday its 2020 forecasts for non-oil domestic exports, projecting 3 per cent to 5 per cent year-on-year growth, compared with an earlier estimate of a 1 per cent to 4 per cent fall. This is partly because demand in the electronics and precision engineering clusters could continue to remain strong in the second half of the year.
Another bright spot is the biomedical manufacturing cluster, being driven by the demand for pharmaceutical and biological products.
The growing demand for digital payment services and for digital solutions is also expected to keep the finance and information and communications sectors robust.
However, MTI expects the downturn in construction and marine and offshore engineering to deepen.