Singapore’s Ministry of Trade and Industry (MTI) has revised its growth forecast for the year to -7% and -5%, from its previous -7% and -4% range.
The move serves to reflect the economic impact of the ‘circuit breaker’ measures that lasted between April and May, as well as the sharp deterioration in the growth outlook of other economies that have been weighed down by the Covid-19 pandemic.
"Notwithstanding the narrowing of the forecast range, there continues to be significant uncertainty over how the Covid-19 situation will evolve in the coming quarters, and correspondingly, the trajectory of the economic recovery in both the global and domestic economies," said MTI.
The city state’s 2Q GDP ended June plunged 13.2% year-on-year, worsening from the 12.6% predicted in advance estimates, the MTI revealed on August 11. The latest figure is a sharp deviation from the 0.3% drop registered in the previous quarter ended March.
It also falls slightly short of the private sector's prediction of a 12.9% downward revision.
Specifically, consumer-facing industries such as retail and food services are said to have felt the heat of the measures, as operations were restricted and even halted during the tighter measures that kicked off in mid-April.
The accommodation and food services sector for one was down an eye-popping 41.4% year-on-year, sharper than the 23.8% decline registered in March. This follows a drop in visitor arrivals following the border control measures imposed to curb the spread of Covid-19 infections.
Similarly, the transportation and storage sector was down 39.2% year-on-year following shrinkage in both air and sea cargo shipments.
Other sectors such as information and communications (-0.5%), business services (-20.2%) and other services industries (-17.8%) also registered declines following weakness in take up rates.
Meanwhile, 2019’s growth-driver of construction was down 59.3% year-on-year following stalled operations. This is as migrant workers from the sectors have been issued stay home notices and quarantine orders to stem the massive outbreaks occurring, particularly amongst these employees.
On an external front, sectors such as manufacturing, wholesale trade and transport and storage are feeling the pinching of disrupted global supply chains and slowdowns in markets of key trading partners. The sector recorded an 8.2% dip in activity in 2Q2020.
This comes from “significant uncertainties” in the global economy such as the risk of a second wave of coronavirus infections, which may once again put a dent on global economic activity.
In line with this, Enterprise Singapore (ESG) – a trade agency under MTI – has cut its 2020 forecasts for Non-Oil Domestic Exports (NODX) and total merchandise trade.
NODX for the year is expected to come in between -10.0% and -8.0% while total trade forecasts have dipped to between -3.0% and 5.0% This is down from predictions of -4 and -1% and -12% and -9% growth range respectively for the metrics.
The only bright spark in 2Q2020 was the finance and insurance cluster which expanded 3.4%. Albeit narrowing from the previous quarter's 8.3% growth, 2Q's showing follows steady expansions in insurance and other activities such as the adoption of digital payments.
For now, MTI says the republic can take refuge from “several areas of strength” such as the electronics and precision engineering clusters. These segments have improved due to stronger-than-expected demand for semiconductor equipment in 2Q2020 which is likely to be sustained till the end of the year.
Other bright spots are biomedical manufacturing – supported by the production of pharmaceuticals – as well as finance & insurance and information & communications.
“The former will be supported in part by the strong demand for digital payment processing services, while the latter will benefit from firms’ continued demand for IT and digital solutions,” asserts MTI.
