Singapore: Economy shrinks at fastest rate in over three decades in Q2
Activity nosedived in the second quarter according to an advanced estimate, pushing the economy into recession. In the three months ending in June, the economy contracted 12.6% year-on-year (Q1: -0.3% year-on-year) and plummeted 41.2% on a quarter-on-quarter seasonally-adjusted annualized (SAAR) basis (Q1: -3.3% SAAR), marking the sharpest contraction since at least 1990.
The steep overall decline was spearheaded by marked contractions in the construction sector (Q2: -54.7% yoy; Q1: -1.1%) and the services sector (Q2: -13.6% yoy; Q1: -2.4%). Both sectors felt the impact of widespread lockdown measures during much of the quarter, aimed at containing the spread of coronavirus: Most construction activity halted, while services catering to tourism, hospitality and retail were severely affected. Furthermore, manufacturing sector growth slowed in the second quarter (Q2: +2.5% yoy; Q1: 8.2%) as supply chain disruption and weak external demand weighed on production.
The outlook for 2020 remains uncertain, although easing of circuit breaker measures in June indicates that activity should rebound in the second half of the year. Nonetheless, external headwinds and uncertainty regarding the full extent of the expected recovery in demand cloud the outlook significantly.
Commenting on the result, Prakash Sakpal, senior economist at ING, noted:
“This will be marked as the bottom of the current downturn. But recovery from here on is going to be weak. Hopes are based on a large stimulus in preserving jobs and preventing further weakness in spending over the rest of the year. But persistent external uncertainty depressing exports and tourism provide no hope of a return to positive year-on-year GDP growth anytime soon, at least not over the rest of this year.”