Singapore Economy Contracts More Than Expected
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Hit by the circuit breaker and widespread closures of businesses, Singapore has reported a 41.2-percent contraction in its economy for the second quarter of the year. Singapore has entered a technical recession, with its economy shrinking 12.6 percent year-on-year in the second quarter of 2020, following -0.3 percent growth in the first quarter, according to advance estimates by the Ministry of Trade and Industry published on Tuesday.
A survey of economists had previously predicted a 10.5 percent contraction. MTI said the weak economic output could be attributed to the circuit breaker from April 7 to June 1, during which non-essential services and most workplaces were closed to limit the spread of Covid-19.
Faring the worst was the construction sector, which contracted 54.7 percent from the year before and 95.6 percent from the first quarter, as a result of manpower disruptions and the closure of almost all worksites during the period. The service industry contracted by 13.6 percent from the year before (-37.7 on-quarter), with tourism-related sectors like accommodation and the air transport sector severely affected by global and domestic travel restrictions.
The numbers clearly reflect the extent of the challenges facing our economy amid the COVID-19 pandemic and the hard work ahead of us to restore the economy, Chan Chun Sing, Minister of Trade and Industry, said in a Facebook post on Tuesday morning.
We expect the 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 localized lockdowns or stricter safe distancing measures,» Chan said.
In May, the Singapore government downgraded the city-state’s growth forecast for 2020 to -4 percent to -7 percent.
The economy was one of the top issues on voters’ minds in the general election, held on Friday. Seeking a fresh five-year mandate, Prime Minister Lee Hsien Loong warned earlier in July of more retrenchments and that the worst of the economic downturn is yet to come.
The ruling People’s Action Party kept its grip on power but fared disappointingly with 61.2 percent of the popular vote. The opposition Workers’ Party increased its representation in parliament to a record 10 seats of the 93 at stake.
Questions & Answers
Q.Which sectors of the Singapore economy were most affected by the economic contraction?
Which sectors of the Singapore economy were most affected by the economic contraction?
The construction sector was hit hardest, contracting 54.7 percent from the year before. The service industry also saw a significant decline, falling 13.6 percent, with tourism-related sectors being severely impacted.
Q.What caused the economy to contract so sharply in the second quarter?
What caused the economy to contract so sharply in the second quarter?
The main cause was the circuit breaker measures from April 7 to June 1, which involved widespread closures of non-essential services and most workplaces. Manpower disruptions and worksite closures also severely impacted the construction sector.
Q.How does this contraction compare to previous predictions for Singapore's economy?
How does this contraction compare to previous predictions for Singapore's economy?
The reported 41.2 percent contraction was significantly worse than expected. A survey of economists had previously predicted a smaller 10.5 percent contraction for the same period.
Q.What is the government's outlook for economic recovery in Singapore?
What is the government's outlook for economic recovery in Singapore?
The Minister of Trade and Industry expects a slow and uneven recovery, citing continued weak external demand. He also mentioned that countries battling second and third waves of outbreaks could lead to further localised lockdowns.
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