The country could be headed for its worst recession in recent memory this year, with the Monetary Authority of Singapore (MAS) warning that its 2020 growth prospects had taken a distinct turn for the worse.
MAS also expects salaries to be cut, though it said the Government's huge fiscal stimulus could still save many jobs from being shed and firms from folding.
As it stands, the forecast is for the gross domestic product (GDP) to shrink by between 1 per cent and 4 per cent. The grimmer end of this estimate already puts the nation on course towards its worst recent recession, surpassing its 3.1 per cent contraction in 1964. In 1998, the GDP shrank 2.2 per cent.
But MAS warned in its macroeconomic review yesterday that matters could get far worse.
"There are significant downside risks to Singapore's growth outlook. The materialisation of any combination of these risks could bring GDP growth below the projected minus 4 to minus 1 per cent range," the MAS said.
Travel restrictions and circuit breaker measures, as well as lack of demand from export markets, are hitting economic activity.
GDP is also expected to drop sharply in the second quarter, with more stringent measures kicking in as Singapore steps up its efforts to contain the coronavirus.
The near-term outlook hinges on how swiftly the pandemic is brought under control, MAS said.
The country's top three banks have already cut their expectations, with forecasts for a GDP contraction ranging from 4 per cent to as much as 10 per cent.
The abrupt pullback in economic activity will weigh heavily on labour demand across broad swathes of the economy, MAS said. "Wages, rather than employment, will bear the brunt of the labour market adjustment in the near term."
Still, it expects the resident unemployment rate to rise.
"Indeed, this will be the darkest year for the Singapore economy since independence," said DBS Bank's senior economist Irvin Seah.
DBS predicts retrenchments to rise to 45,600, while the resident unemployment rate could reach a seasonally adjusted 4.2 per cent. But most analysts expect foreign workers to account for the bulk of retrenchments.
MAS said the Government's fiscal measures in response to the pandemic - which amount to $63.7 billion in total - will help save jobs and businesses.
Deputy Prime Minister Heng Swee Keat said on Facebook yesterday that the Government must continue to ensure that monetary, financial, fiscal and regulatory policies work tightly to ease the impact on businesses and households.
"We are tracking both the global and our situation at home very closely. We will act to further support businesses and households should the situation warrant it."