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Singapore cuts growth outlook, plans stimulus amid virus

(PHOTO: Getty Creative)

By Michelle Jamrisko

(Bloomberg) -- Singapore downgraded its forecast for economic growth for this year and plans to deliver a strong budget this week to counter the threat of the coronavirus outbreak on tourism and trade.

The Ministry of Trade & Industry on Monday projected growth in a range of -0.5% to 1.5% in 2020, compared with a previous estimate of 0.5% to 2.5%. The baseline view is for expansion around the midpoint of 0.5%, it said, although the outlook is still unclear.

“As the COVID-19 situation is still evolving, there is a significant degree of uncertainty over the length and severity of the outbreak, and hence its overall impact on the Singapore economy,” Gabriel Lim, permanent secretary at the ministry, told reporters in Singapore.

The spread of the virus will hurt growth prospects at a time when the economy was showing some signs of a tentative rebound in electronics and improving manufacturing sentiment. The economic impact is already more severe than during the 2003 SARS pandemic, Prime Minister Lee Hsien Loong was cited as saying Friday.

The city state, which has more than 70 cases of virus infections, is losing as many as 20,000 tourists a day amid travel curbs. DBS Group Holdings Ltd. has already lowered its growth projection for this year to 0.9% from 1.4% previously.

What Bloomberg’s Economists Say

“Risk of a technical recession in 1H 2020 is significant due to aggressive steps taken in the region to defeat the virus, alongside the ongoing spread of cases outside of China. Even so, a corresponding rebound in 2H remains a feasible scenario and we have maintained our forecast for growth of 1.0% this year.”

Click here to read the full report.

--Tamara Henderson, Asean economist

Economists in a Bloomberg survey predict Finance Minister Heng Swee Keat will push the budget deficit to its widest in almost two decades to help offset the virus threat. Minister Lawrence Wong, co-chair of the government’s task force on the virus response, has already flagged a “strong” economic package is coming in the budget, due to be delivered Tuesday.

“A large fiscal support will help cushion the economy and do much of the heavy lifting,” said Irene Cheung, a foreign exchange strategist at Australia & New Zealand Banking Group. “Whether that is enough depends on developments on the outbreak.”

The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool, is monitoring the situation closely and affirmed its policy stance remains unchanged, Deputy Managing Director Edward Robinson told reporters Monday. The MAS’s next scheduled policy decision is in April.

The local dollar was little changed at S$1.3914 against the U.S. currency as of 9 a.m. in Singapore.

Other Details

  • The ministry published final estimates for the fourth quarter, which showed gross domestic product expanded at a slightly faster pace at the end of the year than previously estimated: GDP rose an annualized 0.6% from the previous three months, versus an earlier projection of 0.1%, and gained 1% from a year ago

  • Manufacturing contracted an annualized 5.9% in the fourth quarter from the previous three months; services expanded 2.2%, and construction rose 5.3%

  • In a separate report Monday, Enterprise Singapore said it sees non-oil export growth in a range of -0.5% to 1.5% in 2020

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