Challenging times.
In the second quarter of 2020, Singapore fell into recession as our country’s economy contracted 41.2 percent. This decline in gross domestic product (GDP) is worse than the 37.4 percent drop economists had anticipated in a Reuters survey, and it is also much worse than in the first quarter, when our GDP turned negative for the first time in over a decade.
The Ministry of Trade and Industry (MTI) said that the decline is due to the extended circuit breaker measures that were implemented to curb the spread of Covid-19, as well as weak external demand amidst a global economic downturn.
The construction sector was hit the hardest, plummeting by 54.7 percent compared to a 1.1 per cent decline in the first quarter. and the service-producing industry shrunk by 13.6 percent, also seeing a much steeper decline than its 2.4 per cent drop in the first quarter.
But the sector that was hit the hardest was tourism, for obvious reasons. MTI commented that global and domestic travel curbs had "severely" affected tourism-related sectors.
The only bright spot in the economy was the manufacturing sector, which grew by 2.5 per cent year on year in the April to June period, even though the growth was slower than the 8.2 per cent pace achieved in the first quarter.
The good news is that the worst is likely over. “This is the bottom, unless Singapore is forced to regress to the harsher iteration of circuit-breaker measures,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore.
This means that the second quarter may mark the lowest point for our economy, however, the recovery is likely to be slow and gradual.
Trade and Industry Minister Chan Chun Sing said in a Facebook post Tuesday: “The road to recovery in the months ahead will be challenging. We expect recovery to be a slow and uneven journey, as external demand continues to be weak and countries battle the second and third waves of outbreaks by reinstating localised lockdowns or stricter safe distancing measures.”
NTUC Assistant Secretary-General Patrick Tay in a separate Facebook post said the report "paints a sombre and worrying outlook for the Singapore economy for the rest of 2020". He called on Singapore workers to brace themselves, as he expects "a sharp spike in retrenchments and unemployment figures as well", ahead of second-quarter labour market figures to be released at the end of this month.
Singapore exited the circuit breaker on June 1 and began a phased reopening, entering phase two on June 19, which allowed retail shops to reopen and restaurants to resume dine-ins while observing social distancing.
To nurse the economic pains from Covid-19, the Government has so far announced four support packages worth close to S$100 billion, or nearly 20 per cent of GDP. The measures include wage support for affected employers and cash payouts to adult Singaporeans.