Singapore has entered a technical recession after its economy contracted 41.2 per cent in the second quarter from the previous three months, dragged down by weak external demand and COVID-19 “circuit breaker” measures. Several months of COVID-19 restrictions and workplace closures have battered Singapore’s construction, retail and tourism sectors, with little sign of the pain abating. The authorities have flagged that they expect Singapore’s gross domestic product (GDP) to shrink between 4 and 7 per cent this year, as the coronavirus outbreak continues to pose severe strains on the economy.
On a quarter-on-quarter seasonally adjusted annualised basis, Singapore’s GDP shrank 41.2 per cent in the April to June period, deepening the 3.3 per cent contraction in the preceding three months, said the Ministry of Trade and Industry. This means that Singapore has entered a technical recession, defined by economists as two consecutive quarter-on-quarter contractions. Economists polled by Reuters had expected a 37.4 per cent shrinkage.
Year-on-year, the economy shrank 12.6 per cent, deteriorating from the first quarter’s revised 0.3 per cent decline. The construction sector was the worst hit in the second quarter, contracting 54.7 per cent year-on-year after the first quarter’s 1.1 per cent fall. On a quarter-on-quarter basis, the construction sector plunged 95.6 per cent. The services sector shrank 13.6 per cent year-on-year, also seeing a much steeper decline than its 2.4 per cent drop in the first quarter. On a quarterly basis, the sector fell 37.7 per cent.
Meanwhile, domestically oriented services sectors such as food services, retail and business services were also “significantly affected” by the circuit breaker rules, it said. Manufacturing was the only sector to see growth when compared to the same period last year. The sector expanded 2.5 per cent year-on-year, although slowing down from the 8.2 per cent growth in the previous three months. On a quarterly basis, the sector contracted 23.1 per cent.
In a related development, Trade and Industry Minister Chan Chun Sing said that Singapore’s economic recovery in the months ahead will be “challenging”, with the journey “slow and uneven”. “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,” said Mr Chan in a Facebook post after the release of the GDP preliminary data. “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,” he added. Mr Chan said that the pace of Singapore’s recovery will depend on how well the public health situation is managed and whether community infections can be kept low.