The crisis triggered by the Covid-19 pandemic and the unavoidable public health responses have led to repeated downgrades of economic forecasts everywhere. After two revisions since November, Singapore's latest official forecast for gross domestic product growth this year stands at minus 1 per cent to minus 4 per cent. But, as dire as that is, there is a high chance that it will need to be scaled down even further. As the Monetary Authority of Singapore (MAS) cautioned in its Macroeconomic Review released on Tuesday, Singapore's growth outlook for 2020 is subject to significant downside risks, including the possibility that other countries, including Singapore's key trading partners, deploy more stringent containment measures and the pandemic takes longer to control than currently assumed.
Several private sector economists have already cut their projections well below the official estimate. For instance, predicting a "deep and protracted recession", DBS Bank slashed its growth forecast to minus 5.7 per cent (from minus 2.8 per cent previously), while Maybank projects that the economy will contract by 6 per cent in its baseline scenario. If these projections are anywhere near accurate, the coming recession will be the worst in Singapore's post-independence history.
Of particular concern is the potential impact on jobs. In its report on the state of the labour market in the first quarter, the Ministry of Manpower noted that total employment declined by 19,900 workers in the three months to March, which was still below the 24,000 job losses in the second quarter of 2003 during the Sars outbreak. But it added that the first-quarter numbers did not take into account the impact of the circuit breaker period, which started on April 7, and that job losses were likely to increase. This was further confirmed in a survey of firms polled from April 13 to April 17 in which 29 per cent said they would reduce headcount over the next two months, up from 16 per cent polled from March 23 to March 27. Private sector economists, including those from DBS, OCBC Bank and Maybank, reckon that job losses will be far higher than in any previous recession.
What is especially concerning is not only the severity of the recession and the job losses but their likely duration. The MAS cautioned that even after the measures to contain Covid-19 are unwound, the economy is unlikely to quickly return to its pre-Covid-19 state, because households and companies will have to cope with depleted resources and weakened balance sheets. The situation would be far worse if not for the Government's fiscal response, spread over three Budgets. However, given the downside risks, now magnified by the extension of the circuit breaker, even more fiscal measures may be in order to further cushion the impact of the deepening economic crisis on jobs, incomes and companies.