Singapore’s economy is facing its worst contraction since independence more than a half-century ago as the coronavirus outbreak and measures to contain it pummel the trade-reliant city-state.
The government expects gross domestic product to shrink 4% to 7% this year, down from a previous forecast of a 1%-4% contraction, as the outlook for external demand deteriorates, the Ministry of Trade and Industry said in a statement.
“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, in both the global and Singapore economies,” said Gabriel Lim, permanent secretary for the MTI.
As one of the world’s most open economies, Singapore has been severely hit by the slump in global trade and travel amid the coronavirus outbreak. Deputy Prime Minister Heng Swee Keat is set to unveil a fourth stimulus package in Parliament later Tuesday to further counter the economic pain.
Singapore’s gloomy outlook follows downbeat economic news elsewhere in the region over the past week. China abandoned an annual growth target for 2020 and pledged more stimulus, especially targeting employment. Japan saw consumer prices decline in April for the first time in more than three years, while India’s central bank expects GDP to contract for the first time in more than four decades.
The downgrade in Singapore’s growth outlook was despite an improvement in first-quarter GDP. The economy contracted an annualised 4.7% from the previous three months, far better than the 10.6% drop estimated earlier, MTI data showed. That was mainly due to growth in pharmaceuticals manufacturing, which helped offset the slump in electronics.
A surge in pharmaceuticals in April also helped boost manufacturing 13% from a year ago, a separate report showed, compared with a median forecast for a 1% contraction in a Bloomberg survey of economists. Consumer prices declined for the first time since October 2016.
With the “circuit-breaker” restrictions on residents’ movements taking effect only in April, “the real damage will be from the second quarter onward,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd in Singapore.