The economic fallout from the coronavirus outbreak has prompted the Government to lower its growth forecast for the year - and raised the spectre of a possible recession.
Gross domestic product (GDP) is now estimated at between minus 0.5 per cent and 1.5 per cent - a stark revision from November, when the Ministry of Trade and Industry (MTI) tipped expansion of 0.5 per cent to 2.5 per cent.
Mr Gabriel Lim, MTI's Permanent Secretary, noted yesterday that the last time Singapore suffered a full-year recession was in 2001, when GDP contracted by about 1 per cent.
But he added that MTI's view at this point is for GDP growth to come in at about 0.5 per cent for this year, which would mean the country dodges a full-year recession.
"As the Covid-19 situation is still evolving, there is a significant degree of uncertainty over the length and severity of the outbreak, and hence its overall impact," Mr Lim told a briefing.
He also noted that the economy shrank by 0.3 per cent in the second quarter of 2003, amid the severe acute respiratory syndrome (Sars) outbreak. But growth bounced back to 5.3 per cent in the third quarter, and 2003 ended up with growth of 4.5 per cent, added Mr Lim.
Mr Edward Robinson, deputy managing director of the Monetary Authority of Singapore (MAS), said the central bank was ready to recalib-rate its policy if the outlook changes significantly due to the outbreak.
MTI added that the economy grew by 0.7 per cent last year - the slowest growth since 2009. Expansion in the fourth quarter came in at 1 per cent over the same three months in 2018. This beat the initial estimate of 0.8 per cent and was markedly higher than the 0.7 per cent growth in the third quarter.
The great unknown this year is China. Growth there is expected to come in lower than projected due to a pullback in household consumption because of the lockdowns and travel restrictions to contain the virus, MTI said.
"These developments will, in turn, have a knock-on impact on regional economies, including the Asean economies," it added.
Singapore's outward-oriented sectors such as manufacturing and wholesale trade will be affected by weaker growth in several key markets, including China.
Potentially weaker demand in countries importing goods from Singapore also led Enterprise Singapore to downgrade its 2020 non-oil domestic exports growth forecast from zero to 2 per cent, to minus 0.5 per cent to 1.5 per cent.
MTI said the outbreak has led to a sharp fall in tourist arrivals, particularly those from China, while domestic consumption may take a hit as Singaporeans cut back on shopping and dining out.
However, there are pockets of relative strength, such as the construction, and the information and communications sectors.
DBS, OCBC and UOB analysts do not expect a full-year recession, given what they believe will be a strong response by the Government to offset the impact of the outbreak.
Specific measures will be aimed at supporting the tourism, transport, retail and food and beverage industries, while rebates for property, road and diesel taxes and foreign worker levies, bridging loans and training support are also likely.
UOB economist Barnabas Gan said a potential technical recession - two consecutive quarters of contraction - is possible in the first half of this year, but growth will rebound by the end of the year.