Singapore economy may shrink 5.8% this year—survey

The Government has downgraded its 2020 GDP forecast four times in as many months to a range of minus 4 percent to minus 7 percent. The Straits Times/Asia News Network/TIMOTHY DAVID

SINGAPORE — Singapore’s economy will shrink by 11.8 percent in the second quarter year on year, a quarterly survey of 23 economists and analysts polled by the Monetary Authority of Singapore (MAS) has shown.

For the full year in 2020, the poll estimates a 5.8 percent contraction in gross domestic product (GDP), down from a forecast of 0.6 per cent growth in the previous survey and the official estimate of 0.7 percent, the MAS said in a statement.

The government has downgraded its 2020 GDP forecast four times in as many months to a range of minus 4 percent to minus 7 percent – making this year’s slump Singapore’s worst recession since independence.

The economy shrank by 0.7 per cent in the first quarter compared with the same period last year, slightly less than the 0.8 percent decline the MAS survey had forecast in March.

Amid the threat of a second wave of Covid-19, a resurgence of the disease topped the list of downside risks to the outlook. Citing the risk, the majority of respondents or 72.2 percent ranked it as the biggest threat, the MAS said.

Further aggravation in trade tensions was identified by 38.9 percent of respondents as a downside risk, versus 35.3 percent in the March survey.

Compared with the previous survey, about twice as many respondents were concerned about the risks stemming from the deterioration in the labour market, including a rise in unemployment.

On the upside, more than half of those who took part in the poll believed their forecast for a deeper recession may not come to pass if the outbreak is successfully contained.

With most countries across the world easing their lockdowns, a stronger than expected recovery in global economic activity was listed by 38.9 percent as an upside risk to their GDP forecast.

Further fiscal stimulus was also identified by a third of respondents as a key upside risk.

For the second quarter, all the 23 participants of the survey expected lower corporate profitability, and 88.9 percent of them predicted that private residential property prices will decline on a quarter-to-quarter basis.

For the whole of 2020, all respondents expected corporate profitability to decline and more than three quarters believed private residential property prices will drop.

The survey predicts GDP to recover to 4.8 percent growth in full-year 2021. On average, the respondents estimated that at least 4 per cent growth was most likely next year.