SINGAPORE – Singapore’s economy shrank by 12.6 per cent year on year in the second quarter, according to advance estimates from the Ministry of Trade and Industry (MTI) on Tuesday (July 14), as circuit breaker measures to stem the coronavirus pandemic took its toll.
The decline in gross domestic product (GDP) is worse than the 11.3 per cent drop economists had anticipated in a Bloomberg survey. It is also much worse than the first quarter when GDP turned negative for the first time in a decade with the economy contracting by 0.7 per cent.
MTI said the GDP plunge was due to the circuit breaker measures that were implemented from April 7 to June 1 to slow the spread of Covid-19, as well as weak external demand amidst a global economic downturn.
On a quarter on quarter basis, the economy shrank a record 41.2 per cent in the three months to June – entering a technical recession for the first time since 2009. A technical recession refers to two straight quarters of quarter-on-quarter contraction.
MTI’s full-year forecast stood at a 7 to 4 per cent contraction – which would be Singapore’s worst-ever recession since independence in 1965.
The ministry in May had forecast a full-year contraction of 7 to 4 per cent – making the current recession Singapore’s worst-ever since independence in 1965.
The second quarter slump was led by the construction sector that shrank by 54.7 per cent on a year on year basis, a significant deterioration from the 1.1 per cent decline in the first quarter.
“Construction output weakened on account of the circuit breaker measures which led to a stoppage of most construction activities during the period, as well as manpower disruptions arising from additional measures to curb the spread of Covid-19, including movement restrictions at foreign worker dormitories,” MTI said.
On a quarter on quarter basis, the construction sector shrank by 95.6 per cent in the second quarter, far worse than the 12.2 per cent contraction in the first three months.
The services producing industries contracted by 13.6 per cent on a year-on-year basis in the second quarter, steeper than the 2.4 per cent decline in the previous quarter.
The only bright spot in the economy was the manufacturing sector that grew by 2.5 per cent year on year in the April-June period. However, the growth was slower than the 8.2 per cent pace achieved in the first quarter.
Manufacturing growth during in the second quarter was primarily aided by a surge in biomedical manufacturing. Still, weak external demand and workplace disruptions during the circuit breaker period weighed on output in the chemicals, transport engineering and general manufacturing clusters, MTI said.
On a quarter on quarter basis, the manufacturing sector shrank by 23.1 per cent, a sharp reversal from the 45.5 per cent expansion in the preceding quarter.
The advance estimates for the second quarter are largely based on data from April and May, coinciding with the two-month long circuit breaker measures.
Singapore started to relax the circuit breaker measures on June 1 and entered phase two of economic reopening on June 19, allowing most retail shops and restaurants to resume business while observing social distancing.
Revised second quarter estimates – to be released in August – are likely to reflect the impact of the reopening.
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