As the coronavirus pandemic continues to wreak havoc across export-reliant Asian nations, Singapore's trade-reliant economy plunged into recession last quarter as an extended lockdown shuttered businesses and decimated retail spending.
Gross domestic product (GDP) dived by a record 41.2 per cent in the three months ended March, on a quarter-on-quarter annualised basis, the Ministry of Trade and Industry said in a statement Tuesday. Compared with a year earlier, GDP fell 12.6 per cent in the second quarter, versus a survey median of -10.5 per cent.
That was worse than economists' expectations for a 37.4% decline in the quarter when Singapore was under lockdown to curb the spread of the virus.
Major economies facing steepest downturn in decades
The first in Asia to report second-quarter GDP data, the grim numbers for the wealthy city-state - a bellwether for the global economy - underscore the sweeping worldwide impact of the COVID-19 pandemic and point to an arduous road ahead. Many major economies are already facing their steepest downturn in decades.
"If you want to read something into this, it is what is going to happen to economies that have taken a similar sort of lockdown," said Rob Carnell, chief economist, Asia-Pacific at ING Bank.
In June, the International Monetary Fund warned of a steep contraction in global economic activity as the health crisis shut businesses, depressed consumption and paralysed trade. It forecast 2020 world output to shrink by 4.9%, compared with a 3.0% contraction predicted in April.
The once-in-a-century pandemic has so far infected over 13 million people worldwide and killed more than 571,000. Singapore has reported 46,283 coronavirus cases with 26 deaths as of Monday.
"There is an element of global weakness in there as well, obviously the trade side is very important for Singapore and that has been absolutely clobbered," Carnell said.
The sectoral impact was broadbased with the services and construction sector hardest hit.
Construction plummeted 95.6% on a quarter-on-quarter basis, grinding to a near halt as the city-state quarantined tens of thousands of migrant labourers in dormitories ravaged by the virus.
"We were expecting these numbers to look quite dismal, although this is worse than what we had expected," said Steve Cochrane, economist at Moody's Analytics.
On a year-on year basis, GDP dived 12.6% versus economists forecast for a 10.5% contraction.
The manufacturing sector grew 2.5% from a year ago, mainly due to a surge in output in biomedical sector, though that was still lower than the 8.2% rise in the first quarter.
The GDP slump marked the second consecutive quarter of contractions for the global finance hub - having declined a revised 0.3% year-on-year in the first quarter and 3.3% quarter-on-quarter - meeting the definition for a technical recession.
Worst-ever slump
The Singapore dollar was down 0.2% on the day versus the U.S. dollar SGD=.
The government expects full-year GDP to contract in the range of -7% to -4%, the biggest downturn in its history. Citi analysts see a 8.5% contraction and expect another downgrade to official forecasts next month when final GDP data is released.
The central bank eased its monetary policy in March and has introduced measures to boost bank lending, while the government has pumped in nearly S$100 billion ($72 billion) worth of stimulus to blunt the impact of the pandemic.
The People's Action Party, which extended its unbroken rule in last week's election, has said protecting Singaporean jobs is its biggest priority.
Analysts expect the economy to start improving as more business and services reopen, but warned of a bumpy road ahead.
"We expect growth to rebound in H2 supported by a massive fiscal response," said Oxford Economics' Sung Eun Jung.
"But if global demand suffers another blow from a re-imposition of lockdowns...we are likely to see a more 'W-shaped' recovery."
(With agency inputs)
