Singapore has entered its worst recession in 55 years as the Government downgrades the country’s growth forecast for 2020.
The Ministry of Trade and Industry (MTI) had earlier predicted that the economy will shrink between 4 and 7 per cent, however on Tuesday (11 August), the Ministry stated that the gross domestic product (GDP) will decrease between 5 and 7 per cent.
In the second quarter of this year, the trade-reliant economy reduced by 13.2 per cent, as compared to the same period last year. This percentage is worse that the initial estimation of 12.6 per cent.
However, on a quarter-on-quarter basis, the economy shrunk by 13.1 per cent.
“The fall in GDP was due to the circuit breaker measures implemented from April 7 to June 1 2020 to slow the spread of Covid-19 in Singapore, as well as weak external demand amidst a global economic downturn caused by the Covid-19 pandemic,” said MTI in a press release.
The statement also revealed that the industries that were badly affected include construction, transportation and storage, as well as accommodation and food services sector.
In Q2, the construction sector contracted 59.2 per cent compared to the same period last year, as nearly all construction activities came to a halt during the circuit breaker period.
MTI said, “Construction firms were also affected by manpower disruptions arising from additional measures to curb the spread of the virus, including movement restrictions at foreign worker dormitories.”
On the other hand, in the transportation and storage sector, the decimation of global air travel, a decrease in sea cargo volume at the ports and a sharp decline in the use of land public transport due to work from home nature have resulted in the sector shrinking by 39.2 per cent in the second quarter of the year.
As for the accommodation and food services industry, it decreased by 41.1 per cent in Q2 as compared to the same period last year. This is due to a fall in international arrivals and restrictions on dining-in activities during the circuit breaker period.
MTI added in its statement that Singapore’s external demand outlook has slightly been weakened since May when it downgraded the growth forecast for this year to between -7 and -4 per cent.
“Many of Singapore’s key final demand markets saw worse-than-projected economic disruptions in the second quarter, and are also expected to experience a more gradual pace of recovery in the second half of 2020 due to the threat of localised outbreaks and the continued need for restriction measures to contain such outbreaks as they occur,” said MTI.
Commenting on MTI’s latest economic figures, Trade and Industry Minister Chan Chun Sing said in a Facebook post that Singapore will not return back to a pre-COVID world.
“The painful truth that we all need to accept is that we are not returning to a pre-COVID world. Recovery will take some time and is unlikely to be smooth given the recurring waves of infection and disruption we are seeing globally,” he said.
He added, “Unlike the Asian Financial Crisis and Global Financial Crisis where we hunkered down, waited and things improved after a few months, there will be no quick relief this time round.”
Mr Chan also stated that the Government will work now to “build a new economy and to create more opportunities for our businesses and workers”.
“While we may not have all the answers in this increasingly uncertain world, we know that staying still is not an option. We must walk this new path together”.
As to how it is going to be done, Mr Chan said that the Government will hold on to three key principles.
“First, we will open for business in a safe and sustainable manner. Second, we will help our businesses and workers make sense of and adjust to the new world regardless of the sector they are in. Third, we will establish the right macro conditions to preserve our ability to compete globally.
“This is the crisis of a generation. But we are starting from a far more advantageous position compared to our forefathers,” the Minister explained.