Singapore's economy, which is heavily reliant on trade, has been hit hard by the Covid-19 virus outbreak, with a fall in external demand as global economic activity has slowed.
GDP growth contracted by 2.2 percent on a year-on-year basis in the first quarter of 2020, reversing the 1 percent gains in the quarter before, according to advance estimates released by the Ministry of Trade and Industry on Thursday morning.
This represents a contraction of 10.6 percent, compared with 0.6 percent growth in the previous quarter, on an annualized basis.
In particular, manufacturing rose an annualized 4.2 percent in Q1 from the quarter before, while construction fell by 22.9 percent, and services shrank 15.9 percent as a result of supply chain disruptions, travel restrictions, a fall in tourist arrivals and a sharp decline in domestic consumption.
Downgraded Forecast
As a result of the weaker-than-expected economic performance and «sharp deterioration in the external and domestic economic environment since February,» the ministry has downgraded its 2020 GDP growth forecast to -1 to -4 percent – markedly lower than DBS bank's full-year growth forecast, which was revised from 0.9 percent to -0.5 percent last week.
MTI said the wide band is to «account for heightened uncertainties in the global economy, given the unprecedented nature of the COVID-19 outbreak, including the public health measures taken in many countries to contain the outbreak.»
«Degree of Uncertainty»
«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 balance of risks, however, is tilted to the downside,» said MTI in the statement.
As Singapore is among the first countries to publish quarterly GDP data, the slump is a sign of what other countries in the region may expect, «Bloomberg» said in report on the results.
Second Stimulus Package
The government is expected to announce its second stimulus package in parliament later today.
The Monetary Authority of Singapore has also brought forward its next policy decision from April to March 30, which is expected to focus on monetary easing.
