Singapore’s economy shrinks by over 40 per cent in Q2, entering recession
- The city state’s economy, seen as a bellwether for the region, was hit by the coronavirus lockdown and weak external demand, the Trade and Industry Ministry said
- Analysts see some signs of a recovery, but these could be affected by low consumer confidence and uncertainty over what would happen when stimulus funds run out
Singapore’s export-focused economy sharply contracted in the second quarter according to early estimates released by the trade ministry, sending the city state into a technical recession and putting it on track for its worst economic showing since independence.
As one of the first Asian economies to publish quarterly data, Singapore is often seen as a bellwether for the region. lts GDP for the second quarter shrank by 41.2 per cent on a quarter-on-quarter, seasonally adjusted annualised basis, after a 3.3 per cent drop in the first quarter from the preceding three months.
The Trade and Industry Ministry said the steep decline was due to the partial lockdown imposed from April 7 to June 1 after the number of coronavirus cases in the city state spiked, coupled with the “weak external demand” amid the global economic downturn caused by the pandemic.
The economy contracted by 12.6 per cent year-on-year in the April to June period, the ministry said, as it maintained its full-year growth forecast to come in at a -7 to -4 per cent range, after slashing its prediction three times this year, most recently in end-May.
It added that the manufacturing sector was the only sector that grew – at 2.5 per cent on a year-on-year basis – primarily due to a surge in output in biomedical manufacturing. It also noted that weak external demand and workplace disruptions during the three-month period had weighed on the chemicals, transport engineering and general manufacturing sectors.
Analysts said the figures were in line with their predictions and not unexpected as the partial lockdown forced most businesses and workplaces to shut.
“Everything ground to a halt,” said Selena Ling, head of treasury research and strategy at OCBC Bank, who added that most sectors had been badly hit by the pandemic. “For construction, for instance, because all the foreign workers were on stay-home notices in the dormitories, the [sector] would have easily seen up to 80 per cent of activity stalling.”