Singapore cuts 2020 GDP forecast to -0.5% to 1.5% due to COVID-19 outbreak
Singapore is expecting slower growth in 2020 and has downgraded its gross domestic product (GDP) forecast amid concerns about the ongoing COVID-19 outbreak. Economic growth for this year is now expected to come in at around 0.5 per cent, the mid-point of an estimated range of -0.5 per cent to 1.5 per cent, said the Ministry of Trade and Industry (MTI) on Monday. The previous forecast range announced last November was 0.5 to 2.5 per cent.
Last week, Prime Minister Lee Hsien Loong warned that the ongoing COVID-19 outbreak will have a significant impact on the local economy for the next couple of quarters. MTI said its previous forecast range was premised on a modest pick up in global growth and a recovery in the global electronics cycle this year. But the outbreak of COVID-19 is likely to dampen the growth prospects of China and other affected countries around the world. In China, growth will likely come in lower than earlier projected due to a pullback in household consumption, as a result of the lockdowns and travel restrictions implemented in several major Chinese cities to contain the spread of the virus.
Industrial production has also been disrupted because of work stoppages and delays arising from these containment measures, MTI said. These developments in China will, in turn, have a knock-on impact on regional economies through lower outbound tourism and other import demand from China, as well as disruptions to supply chains. “Should the COVID-19 outbreak be more widespread, severe and protracted than anticipated, there could be a sharper pullback in global consumption, as well as more prolonged disruptions to global supply chains and production,” the report said.
A sharper-than-expected slowdown in the Chinese economy arising from the outbreak will also negatively affect global trade and economic growth, MTI added. At the same time, uncertainties in the global economy remain, such as an uncertain US-China trade relation and geopolitical tensions in the Middle East.
Against this backdrop, MTI said the outlook for the Singapore economy has weakened since its last review in November, with the COVID-19 outbreak expected to affect the Singapore economy through several channels. First, outward-oriented sectors, such as manufacturing and wholesale trade, will be affected by the weaker growth outlook in several of Singapore’s key final demand markets, including China. Second, the outbreak has led to a sharp fall in tourist arrivals, particularly from China, to Singapore. This has badly affected the tourism and transport sectors. Third, domestic consumption in Singapore is likely to decline as locals cut back on shopping and dining-out activities. This will adversely affect firms in segments such as retail and food services. “As the COVID-19 situation is still evolving, MTI will continue to monitor developments and their impact on the Singapore economy closely,” it said.
In its report on Monday, MTI said the Singapore economy expanded by 1 per cent year-on-year in the last quarter of 2019. This is higher than the Government’s initial estimate of 0.8 per cent and the third quarter’s 0.7 per cent growth. On a quarter-on-quarter seasonally adjusted annualised basis, Singapore’s GDP grew by 0.6 per cent. This is way below the 2.2 per cent expansion in the third quarter but above the 0.1 per cent flash estimate. This brings the full-year growth in 2019 to 0.7 per cent, slower than 2018’s 3.4 per cent and hitting its lowest since the global financial crisis in 2009.
The manufacturing sector contracted by 1.4 per cent, reversing from the 7.0 per cent growth in 2018. The sector’s performance was weighed down by output declines in the electronics, chemicals, precision engineering and transport engineering clusters, said MTI. The construction sector expanded by 2.8 per cent, a turn-around from the 3.5 per cent contraction in 2018, supported by both public sector and private sector construction works. The services producing industries grew by 1.1 per cent, moderating from the 3.4 per cent growth in 2018, with growth was mainly driven by the finance and insurance, other services and business services sectors.