Singapore is preparing for one of its worst recession since its independence. The country is one of the world’s most open economies and one of the first to report growth data since Covid-19 hit the shores of the nation.
The country has been fighting the virus outbreak, which has killed thousands of people globally since mid-January. It has seen a surge in mainly imported infections in recent days, causing the government to order the closure of bars, discos, and cinemas and limit gatherings.
Singapore has one of the highest numbers of infected cases in Asia and has implemented strategies to curb the spread, which include the closure of most workplaces and schools until June 1. The virus has been contracted by more than 30,000 people in the city-state, with over 20 deaths recorded.
Although Singapore hasn’t been on lockdown like other countries, its economy still shrank by 2.2% in Q1 with massive hits to services, construction, and manufacturing industries. The shrinkage was the biggest since the 2009 financial crisis and was below the expectation of several economists for a 1.5% decline.
Quarterly, the Gross Domestic Product shrank 10.6%, which is the lowest since 2010 and below expectations for a 6.3% decline. This data motivated the Ministry of Trade to cut its 2020 GDP forecast range to -4% to -1%, from a previous range of -0.5% to 1.5. Several economists have concluded that the global economy is already in recession as coronavirus continues to spread across nations.
Highlighting the suddenness and extremity of its impact, separate data today showed Singapore’s industrial output plunged 22.3% in February, which is the most significant contraction in official records since 1983.
The Monetary Authority of Singapore(MAS) has said that salaries are likely to be reduced. Still, the sizeable fiscal stimulus from the Government means that many jobs will not be cut and that companies don’t have to shut down operations.
For Q2 of the year 2020, the GDP is likely to see a sharp reduction as a result of the circuit breaker restrictions that have caused many people to stay home from work.
MAS further added that depending on how the novel virus is contained will determine future outlook.
Also, the top three banks in Singapore have predicted a GDP contraction of 4 and 10 per cent, which primarily affects the demand for labour. According to MAS, wages may not be affected, but labour may experience the burn of the labour market soon.
The banks foresee an increase in the loss of jobs by 45,600, and the unemployment rate among residents may get to a seasonally adjusted 4.2%. However, several analysts believe that the loss of jobs will be felt more by foreign workers.
Nonetheless, the S$63.7 billion in fiscal measures from the government will go a long way in helping both companies and jobs. In its report, the Monetary Authority of Singapore highlighted that the near-term economic outlook is fraught with uncertainty. That there’s so much still unknown about the virus. It further said that there’s no assurance that countries can contain the virus by the second half of the year.
The economy is not looking good. However, decisive and well-calibrated action needs to be put in place quickly to cushion the downturn and prevent further deterioration that can affect jobs and livelihood.
In a Facebook post, Singapore’s Minister of Finance, Heng Swee Keat, as well the Deputy Prime Minister, has urged Singaporeans to stay united in these challenging times.
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