Singapore’s Ministry of Trade and Industry (MoT&I) has revised its 2020 gross domestic product (GDP) forecast and downgraded it for the third time on Tuesday since the coronavirus pandemic impacted the economy severely as it rolled into its deepest recession. The city-state has become one of the countries in Asia that has the highest number of coronavirus infections and it has said that the city-state would proceed to ease lockdown from next month gradually.
High Economic Contraction
The city-state reported that it has reviewed its GDP forecast and found that the economic contraction caused by the virus outbreak would be far worse than the previous estimation. This year economic contraction of the state would be expected to a range of -7% to -4% from the prior range of -1% to -4%. Meanwhile, Singapore’s economy dipped 0.7% year-on-year in the first quarter (Q1) and 4.7% on a quarter-on-quarter, a less severe decline than economist estimates, although officials and analysts warned of a possible economic crisis ahead.
Gabriel Lim, the Permanent Secretary at the MoT&I, said, “There continues to be a significant degree of uncertainty over the length and severity of the COVID-19 outbreak, as well as the trajectory of the economic recovery.” Following the news, the chief economist of central bank Ed Robinson said that monetary policy remained unchanged and would next be reviewed in October.
The Singapore government had first witnessed the possibility of a recession in February when it projected a downgraded outlook of its 2020 GDP forecast to -0.5% to 1.5%, from 0.5% to 2.5% previously. Meanwhile, Singapore’s finance minister is set to announce the country’s multi-billion-dollar economic packages to support businesses and industries on late Tuesday.
Contraction for the Third Time
Singapore has also downgraded its 2020 forecast for non-oil domestic exports to -4.0% to -1.0%, from -0.5% to 1.5% previously since exports have been a rare bright spot for the economy in recent months mainly due to a surge in demand for pharmaceuticals. As per factory data, it was reported on Tuesday, May 26, 2020, that demand for industrial output increasing 13% in April on a year-on-year basis, as pharmaceuticals production more than doubled.
However, the country’s main price gauge has contracted for the third consecutive month in April, falling 0.3% and hitting a fresh 10-year low since the virus pandemic hampered economic activities in the city-state due to closure of business operations. Analysts projected the economy is expected to experience a deeper contraction in the Q2 as a result of a two-month lockdown, dubbed a “circuit breaker” by authorities, imposed by the spread of the novel coronavirus.
Selena Ling, OCBC Bank’s head of treasury research and strategy, stated, “The downward revision…implies a significant deterioration in the second-quarter momentum due to the circuit breaker period as well as a weak recovery trajectory.”
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