Singapore: Singapore’s economy contracted the most in a decade in the first quarter, a bellwether for the rest of Asia as the fast-spreading coronavirus shuts down vast parts of the world.
Gross domestic product fell an annualized 10.6% in the first quarter from the previous three months, with the government now expecting a sharp full-year contraction in the economy of 1%-4%.
As the first Asian country to publish quarterly GDP data, Singapore foreshadows the pain the rest of the region can expect. Thailand is already projecting its biggest economic contraction since the Asian financial crisis more than two decades ago, and several countries are bracing for the worst outcome in years.
Purchasing managers surveys are showing severe contractions in global output at the beginning of the year, with many economists expecting second-quarter figures to be even worse.
Singapore’s data “is like the canary in the mineshaft and warns of further economic pain to come for other Asian economies,” said Selena Ling, head of treasury research and strategy at Oversea-Chinese Banking Corp. in Singapore. “Global growth forecasts revisions downwards have been coming fast and furious.”
The quarterly plunge in Singapore’s GDP was worse than the median forecast of an 8.2% decline in a Bloomberg survey of economists. Compared with a year earlier, GDP fell 2.2% in the first quarter, versus a median estimate of -1.4%.
Other key details of the GDP report, based on annualized quarter-on-quarter data:
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- Manufacturing rose 4.2%, rebounding from a 5.9% contraction in the fourth quarter
- Construction plunged 22.9% due to supply-chain disruptions and delays in the return of foreign workers given travel restrictions
- Services shrank 15.9% with airlines, hotels and restaurants hit by a drop in tourism
“As the global Covid-19 situation is still evolving rapidly, there remains a significant degree of uncertainty over the severity and duration of the global outbreak, and the trajectory of the global economic recovery once the outbreak has been contained,” the Ministry of Trade and Industry said in a statement. “The balance of risks, however, is tilted to the downside.”
The Singapore dollar was down 0.2% against the U.S. currency as of 11:35 a.m. on Thursday.
What Bloomberg’s Economists Say
As large as the contraction in Singapore’s economy was in 1Q, it will likely deepen in 2Q. Within Southeast Asia, though, Singapore may escape the worst this year, despite being the most open economy. The government is staying on top of the virus, which eases fear and keeps more businesses open. – Tamara Mast Henderson, Asean economist
Deputy Prime Minister Heng Swee Keat is set to unveil a second stimulus package in Parliament later Thursday to shore up the flailing economy. Economists expect Singapore will use its past reserves for the first time since the global financial crisis, although Heng cautioned Thursday against “excessive expectations” about the size of the package.
More support is also likely from Singapore’s central bank, which has brought forward its policy decision to March 30.
“There is a high chance the government will dip into the reserves to fund the second stimulus, which could be larger than what was announced in Budget 2020,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. in Singapore. The Monetary Authority of Singapore “will surely need to ease aggressively on Monday.”
The government had previously forecast full-year growth around the 0.5% midpoint of its forecast range of -0.5% to 1.5%.
The downgrade in projections to a full-year recession is based on a worsening outlook, including the spread of the virus to many more countries, tighter border controls, and safe-distancing measures that would hit consumer sectors like retail and food and beverage, the government said. Singapore has been on especially high alert for weakness after key trading partners, like Malaysia, shut their borders.
Oxford Economics Ltd. is bracing for a bigger hit in the second quarter, with economist Sung-Eun Jung revising full-year growth in Singapore to a range of -4% to -3%.
“Services will likely be worse in the second quarter as people’s movement has altogether stopped, especially cross-border,” Jung said. “We also expect manufacturing to perform worse in the second quarter as global economic activity falls sharply despite China returning slowly to normalcy.”
Singapore’s advance GDP estimates are computed largely from data in the first two months of the quarter, and often are revised once the full quarter’s data are available. – Bloomberg
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