Singapore flags deep recession after first-quarter GDP falls

March 26, 2020 09:40
Singapore's gross domestic product fell 2.2 percent in the first quarter from a year earlier, the biggest drop since the 2009 financial crisis. Photo: Bloomberg

Singapore’s economy suffered its biggest contraction in a decade in the first quarter, data showed on Thursday, as the coronavirus pandemic prompted the city-state to cut its full-year GDP forecast and plan for a deep recession.

The grim data is likely to reinforce fears that global activity will sharply contract in the first half of the year. Singapore is one of the world’s most open economies and one of the first to report growth data since the virus spread from China at the start of the year.

The city-state's economy shrank 2.2 percent in the first quarter from a year earlier, preliminary readings from the Ministry of Trade and Industry showed.

That marked the biggest drop since the 2009 financial crisis and was below economists’ expectations for a 1.5 percent decline. On a quarterly basis, gross domestic product (GDP) shrank 10.6 percent, the lowest since 2010 and well below expectations for a 6.3 percent decline.

The data prompted the trade ministry to cut its 2020 GDP forecast range to minus-4 percent to minus-1 percent, from a previous range of minus-0.5 percent to 1.5 percent, and firmed up investors’ bets for major fiscal and monetary stimulus.

“The Covid-19 outbreak has escalated, and led to a significant deterioration in the economic situation both externally and domestically,” the trade ministry said.

Just weeks after announcing multibillion-dollar schemes to offset the impact of the outbreak on businesses and households in its annual budget, the finance ministry is set to announce more relief packages later on Thursday.

The Monetary Authority of Singapore (MAS), meanwhile, has brought forward its semi-annual monetary policy statement to Monday, March 30, and many economists are expecting drastic easing not seen since the financial crisis.

“The extent of the first two months already tells you ... how bad it is going to get,” said Selena Ling, head of treasury research and strategy at OCBC Bank.

“The likelihood is that they will bring out a very big bazooka this afternoon, and come next Monday, MAS will also do what’s necessary.”

Singapore has been battling the virus outbreak which has killed more than 19,000 globally since mid-January. It has seen a surge in mainly-imported infections in recent days, and on Wednesday recorded its biggest daily jump in cases bringing its total to 631.

“With a number of major industrial economies now instituting social distancing measures and/or lockdowns, large-scale near-term declines in economic activity are on the way, and a global recession is now our baseline,” Oxford Economics said in a note to clients this week, while noting growth could rebound quickly once tough containment measures are lifted. Reuters

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