Singapore: Second estimate revises GDP contraction down to new record low in Q2
August 11, 2020
Singapore’s economy performed worse in Q2 than initially estimated, according to new figures released on 11 August. GDP nosedived a revised 13.2% year-on-year in the second quarter (previously reported: -12.6% yoy), notably below the first quarter’s 0.3% contraction and marking a record low, as the government’s circuit breaker measures to contain Covid-19 hammered activity and the global economy halted. On a quarter-on-quarter seasonally-adjusted annualized (SAAR) basis, GDP plummeted a revised 42.9% in Q2 (previously reported: -41.2% SAAR), which followed Q1’s 3.1% drop and also marked an all-time low.
Looking at the details, the downturn was broad-based, with contractions recorded in the manufacturing, construction and services sectors. The construction sector took the hardest hit, contracting 59.3% annually in Q2, as lockdown measures impaired activity (Q1: -1.2% yoy). The services sector plunged 13.4%, weighed on by sharp falls in accommodation and food services, and transportation and storage activity. Meanwhile, manufacturing activity fell 0.7%, contrasting Q1’s 7.9% growth. Upbeat demand for electronics from the 5G market, data centers and other technology services tempered the fall, however.
Looking ahead, the outlook is bleak. The external backdrop remains grim with only gradual recoveries seen in many of Singapore’s key trading partners, which will hurt the country’s recovery. Moreover, the prolonged closure of international borders will hurt tourism and could disrupt sectors that rely on foreign workers. Accordingly, the MTI narrowed its GDP forecast to between a 7.0% and 5.0% contraction this year (previously forecast: -7.0% to -4.0%).
Commenting on Nomura’s view, analysts Euben Paracuelles and Charnon Boonnuch added:
“We maintain our full-year 2020 GDP growth forecast of -5.6%, within the MTI’s new forecast range. Our forecast implies a sluggish recovery in H2 with a modest pickup in GDP growth to -8.8% y-o-y in Q3 and -0.3% in Q4, reflecting our view of the continued disruption from social distancing measures and still weak external demand, as well as its negative spillover effects on labour market conditions.”