The bank has revised its full-year growth forecast from 0.9 percent, to -0.5 percent.
With the Covid-19 outbreak spreading beyond Asia and showing no signs of stopping anytime soon, a recession in Singapore «appears inevitable,» DBS economist Irvin Seah said in a research note published on Thursday.
«Global outlook hasn’t been grimmer than this since the Global Financial Crisis,» Seah said, noting that while the services sector will bear the brunt, the manufacturing sector will not be spared, and warned of knock-on effects on the labor market, with retrenchments to rise in the coming months.
He also added that the -0.5 percent growth forecast «comes with significant downside risks should the outbreak worsen further.»
Strong Policy Response Needed
The bank expects the Singapore government to announce a second stimulus package of about S$14–16 billion ($9.65–11.03 billion), which equates to 2.9 percent of GDP.
Given falling inflation and significant downside risk to growth, he expects a more aggressive response by the Monetary Authority of Singapore (MAS), which might entail ending the modest and gradual appreciation path of the SGD NEER policy band, and the introduction of a downward re-centering of the band by up to 2 percent.
