Singapore markets open in 5 hours 40 minutes

Singapore's economy to inevitably enter recession this year: analysts

Janet Ong
Finance Editor
A security personnel views a thermal screening monitor as visitors enter Gardens by the Bay in Singapore, March 14, 2020. (PHOTO: AP Photo/Ee Ming Toh)

SINGAPORE — Singapore is inevitably entering into recession due to the severe impact of the coronavirus pandemic, economists said.

While the S$48 billion Resilience Budget announced by Deputy Prime Minister and Finance Minister Heng Swee Keat on Thursday (26 March), in addition to the earlier S$6.4 billion package, would help alleviate the massive hit from COVID-19, the economists said the measures would not help prevent the recession.

The total S$55 billion relief package represents about 11 per cent of Singapore’s gross domestic product (GDP). On Thursday, the Ministry of Trade and Industry (MTI) slashed its 2020 GDP forecast range to -4 per cent to -1 per cent, from -0.5 per cent to 1.5 per cent previously, after it said advance estimates for the first quarter of this year showed the economy contracted 2.2 per cent year-on-year.

Following the release of the MTI data, DBS senior economist Irvin Seah called a recession in Singapore “inevitable” and slashed his forecast for 2020 GDP forecast to 2.8 per cent contraction, a week after he cut it to 0.5 per cent decline, from 0.9 per cent growth.

The economic contraction for the next two quarters is likely to be even deeper than the first quarter, with an expected decline of more than 3.5 per cent, said Seah. He noted that the shrinkage was the worst since the 2009 financial crisis, while the 10.6 per cent drop in GDP on a quarterly basis was the lowest since 2010.

As such, the “unprecedented fiscal push” was needed given the “uncharted waters” that Singapore is heading into, Seah said. “In light of the risk to employment, the key focus on the Resilience Package is to help companies weather the crisis so as to mitigate against potential job losses,” he added.

Maybank Kim Eng analysts Chua Hak Bin and Lee Ju Ye cut their estimates for Singapore’s 2020 GDP to -2.3 per cent from -0.3 per cent, saying that while the Resilience Budget would help cushion the pain experienced by the worst hit sectors, it will not prevent a recession.

“The fiscal support will reduce job losses and the extent of unemployment, but will not be able to lift GDP growth or the corporate revenue line,” Chua and Lee said. They expect Singapore’s unemployment rate to climb to around 3.5 per cent from the current 2.3 per cent, with job losses of around 40,000 to 50,000 for this year.

The relief measures may be sufficient for six to nine months but if the world and Singapore were to remain in recession in the fourth quarter, another fiscal package may be necessary, Chua and Lee added.

Selena Ling, OCBC head of research and strategy, agreed with the economists’ gloomy outlook, saying that the comprehensive relief package is not going to stave off a recession in Singapore.

“The Singapore economy is like a patient that is suffering a cardiac arrest, and Resilience Package is the CPR being administered,” said Ling, adding that it is important to continue monitoring Singapore’s economic vitals as the pandemic is still evolving rapidly.

In a move to bolster financial stability, the Monetary Authority of Singapore (MAS) announced last week that it had established a US$60 billion swap facility for at least six months with the US Federal Reserve to provide US dollar liquidity to financial institutions in Singapore.

Seah expects the MAS to ease its monetary policy next Monday in order to render more support for the economy. He expects MAS to end the modest and gradual appreciation path of the Singapore dollar NEER policy band - the management of the local dollar against a trade-weight basket of currencies from Singapore’s key trading partners - and introduce a downward re-centring of the band by up to 2 per cent.

Stay in the know on-the-go: Join Yahoo Singapore's Telegram channel at

Related stories:

COVID-19 Budget: Singapore allocating additional $48 billion to combat ‘unprecedented crisis’

COVID-19 Budget: President, political office holders to take 3 months pay cut: DPM Heng

COMMENT: Singapore 1Q GDP hit is pretty standard for a crisis